What is the maximum variance in APR that is permissible for a "regular transaction" under TILA?

The maximum variance in the Annual Percentage Rate (APR) that is permissible for a "regular transaction" under the Truth in Lending Act (TILA) is 1/8% (or .125). This regulation ensures that lenders must disclose accurate and transparent information regarding the costs of credit to consumers, particularly ensuring that the APR disclosed is as close to the actual APR being applied as possible.

When lenders provide this information, they are held to a standard of accuracy to foster consumer trust and to facilitate informed decision-making. In situations where the actual APR varies from the disclosed APR by less than or equal to this threshold, the disclosure is considered compliant. If the difference exceeds this variance, it can lead to regulatory violations and potential penalties.

This specific threshold is recognized because it balances the need for accurate disclosures with minor fluctuations that might occur due to variations in the loan structure or market conditions. Such precision is necessary to maintain the integrity of the lending process and protect consumers from misleading information.