What action must a creditor take if it is discovered that the APR is outside of the range of tolerance?

If a creditor discovers that the APR (Annual Percentage Rate) is outside of the acceptable range of tolerance, the correct action is to provide disclosure of the corrected discrepancy and wait three business days before closing. This requirement is in place to ensure that borrowers are fully informed about the terms of their loan and have adequate time to understand the implications of the corrected disclosure on their financial commitments.

The three-day waiting period allows borrowers to consider their options and make informed decisions about whether they wish to proceed with the loan under the new terms. This requirement is part of the Truth in Lending Act (TILA), which aims to promote transparency and fairness in lending practices. By adhering to this protocol, creditors ensure compliance with regulatory standards while also protecting the interests of the consumer.

Providing the corrected disclosure allows the creditor to rectify the situation and maintain a professional relationship with the borrower, as it demonstrates a commitment to transparency. This measure is vital for fostering trust and accountability in the lending process.