The Origins of TILA
The Federal Reserve Board originally had had the authority to implement the Truth in Lending Act "TILA", but this passed to the Consumer Financial Protection Bureau (CFPB) in 2011 in the wake of the Dodd-Frank Act. Regulation Z is a section of the code that explains the specific regulations and requirements that TILA contains, and so a reference to Regulation Z is typically a reference to all or the majority of TILA.
Annual Percentage Rates (APR) were introduced with TILA in order to combat unclear rates and deceitful business practices relating to lending procedures. TILA requires every advertisement that has an interest rate to also list the APR. This includes any type of commercial message, no matter the medium. APR rates can certainly be adjusted based on how the fees are set up, which means companies can advertise a lower APR if the loan is based on a low interest rate with a high fee structure. Other more opaque interest rate calculations had been used heavily in the auto loan industry, but were present in other industries as well.
The Auto-Maker Loophole
“Zero Percent” APR became a practice in the auto industry when auto makers discovered they could shift money between the “amount financed” and the “finance charges”. When they bundle the price of the car and its financing charges, they are capable to eliminating the finance charge entirely. The offers in the auto industry often offer 0% APR OR a rebate off the price of the vehicle, which means if they choose the 0% APR they end up paying the price of the rebate to get the 0% APR. Only Auto Makers can do this style of bundling, while other financial institutions and banks are left at a disadvantage as they are forced to show the true APR rates while the car companies can state that there are no interest costs.