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  • Annual Percentage Rate ("APR")

    • CM-8.5.5

      The APR is a standard measure that allows consumers to compare total charges for credit facilities to be compared on a like-for-like basis. The APR allows the consumer to compare the total charge for credit over differing periods (e.g. — two versus three years) with differing payment profiles and taking into account the payment of any other fees payable as a condition of the contract, such as documentation fees or insurance premiums.

    • CM-8.5.6

      The APR should be shown clearly on the facility document and "key terms disclosure" document (as set out in paragraphs CM-8.5.1 to CM-8.5.4 above).

    • CM-8.5.7

      The APR methodology should also be utilised in advertisements for credit. Any deferral of profit or principal announced by the bank should also take account of the APR methodology, and the new APR should be given to the client or made public in advertisements.

    • CM-8.5.8

      The total charge for credit payable by a consumer includes the following items:

      (a) Interest payable on the loan or credit;
      (b) Documentation or administration fees;
      (c) In the case of finance lease contracts, any fees for purchasing the asset (e.g. an option to purchase fee payable at the end of the contract); and
      (d) Any fees or charges payable under any linked or mandatory contract entered into as a condition for the granting of the credit facility, such as payment protection insurance.

    • CM-8.5.9

      The APR must be calculated using the following methodology:

      K=m
      ∑
      K=1      		 Ak
      (1 + i) tk      		 = K'=m'
      ∑
      K'=1      		 A'k'
      (1 + i) tk'

    • CM-8.5.10

      The meaning of letters and symbols used in the above formula are:

      K is the number identifying a particular advance of credit;
      K' is the number identifying a particular instalment;
      Ak is the amount of advance K;
      A'k' is the amount of instalment K;
      ∑ represents the sum of all the terms indicated;
      m is the number of advances of credit;
      m' is the total number of instalments;
      tk is the interval, expressed in years between the relevant date and the date of advance K;
      tk' is the interval expressed in years between the relevant date and the date of instalment K';
      i is the APR, expressed as a decimal.

    • CM-8.5.11

      For the purpose of this chapter, the "relevant date" is the earliest identifiable date on which the borrower is able to acquire anything which is the subject of the agreement (e.g. delivery of goods), or otherwise the "relevant date" is the date on which the credit agreement is made.

    • CM-8.5.12

      In the case of instalment finance such as a loan, where there is no reimbursement of cost of credit in the event of early repayment, then the residual interest (or cost of credit) in the old loan must be added to the cost of credit for the new facility, and the APR amended accordingly.