Future Business Leaders of America (FBLA) Business Law Practice Exam

Which law requires creditors to inform consumers of the costs and terms of credit?

1. Fair Credit Reporting Act

2. Consumer Credit Protection Act

3. Truth in Advertising Act

4. Bankruptcy Act

The correct answer is: Consumer Credit Protection Act

The Consumer Credit Protection Act is the correct choice because it mandates that creditors provide clear and transparent information regarding the costs and terms associated with credit. This includes outlining interest rates, fees, and the total cost of financing, ensuring that consumers make informed decisions about credit products. This law aims to protect consumers by promoting honesty and accuracy in credit transactions, which is crucial for fostering trust between creditors and consumers. The other laws mentioned do not focus specifically on the disclosure of credit terms and costs. The Fair Credit Reporting Act primarily deals with the regulation of consumer credit reporting agencies and the accuracy of credit reports rather than the terms of credit itself. The Truth in Advertising Act is concerned with false advertising and ensuring that promotional materials are truthful but does not cover credit disclosures. The Bankruptcy Act relates to the legal process by which individuals or businesses can seek relief from insolvency and does not provide guidance regarding credit terms.