Which law mandates that lenders use an annual percentage rate (APR) for informed borrower comparisons?

The correct response is rooted in Regulation Z, which is part of the Truth in Lending Act (TILA). This federal regulation requires lenders to disclose the annual percentage rate (APR) to borrowers. The APR is a crucial figure as it represents the total cost of borrowing on a loan, expressed as a yearly interest rate, which allows borrowers to make informed comparisons between different loan offers.

By mandating the disclosure of the APR, Regulation Z enhances transparency in lending practices and helps consumers understand the true cost of credit over time. This is essential for making informed financial decisions, as it includes not just the interest rate, but also any additional fees or costs associated with the loan.

In contrast, other options such as Regulation X, the Fair Housing Act, and the Equal Credit Opportunity Act address different aspects of lending and consumer protection. Regulation X focuses on the Real Estate Settlement Procedures Act (RESPA), which governs disclosures related to settlement costs, while the Fair Housing Act prohibits discrimination in housing. The Equal Credit Opportunity Act ensures that all consumers have equal access to credit without discrimination. All these laws play significant roles in the framework of consumer protections in lending, but only Regulation Z specifically mandates the APR for borrower comparisons.