Are you getting the right information on your APR : Credit Card Guide

Are you getting the right information on your APR

We've all seen the glossy ads in the magazines, newspapers, and television, where various lenders are offering headline APRs on finance, making the whole deal sound very attractive.

However, for those taking out Payment Protection Insurance the APR may not be as attractive as it sounds – in fact, according to a group of debt charities many loan agreements may not be enforceable because consumers may have been provided with inaccurate information with regards to the APR being charged.

According to Debt on our Doorstep, which is a group of debt charities and agencies, many lenders are advertising low APRs, but are not taking the cost of Payment Protection Insurance into account when calculating the APR, which is something that should be done.

As a result of this failure the charity group claims that around fourteen million loan agreements, equating to around £6.5 billion worth of loans, may not be enforceable because the consumers were misled about the APR. The group stated that when the cost of PPI is factored in the APR could sometimes be twice the APR advertised.

One official from the group stated that new regulations were introduced in 2005 to try and alleviate this issue. He said: "There is a lack of clarity in the Consumer Credit Regulations 2004. When these were brought in 2005, the OFT issued draft guidance stating lenders should include the cost of PPI in the calculation of the APR in loan agreements, and set out a single APR for the overall cost with subheadings that broke this down into the loan and the PPI policy so you could see each element clearly."

The Office of Fair Trading has stated that it is concerned about this issue, and that a review will be carried out to assess and rectify the problem.

Tom Smith
6th October 2007

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