Is consummation the same thing as closing or settlement?

Consummation refers specifically to the point in a consumer credit transaction when the borrower becomes obligated to the creditor. In the context of the Truth in Lending Act (Regulation Z), consummation is a critical event that triggers certain disclosures and the borrower's rights, including the right to cancel certain types of loans.

Closing or settlement, on the other hand, is the final step in the loan process where the actual exchange of documents and funds occurs. While closing may follow consummation in many instances, they are not synonymous. At consummation, the borrower has already entered into the loan agreement, but the transfer of property and payment of funds, conducted during closing, may not take place immediately after.

Because these terms describe different phases of the loan process and have distinct legal implications, the distinction is important for understanding consumer rights and lender obligations under Regulation Z. This clarity ensures that consumers are aware of their obligations and rights at both stages of the process.