Fairer rules on APRs

By DAILY MAIL REPORTER
Updated:

 

The Office of Fair Trading has issued a tough warning to lenders over the use of annual percentage rate figures (APRs), which are supposed to reflect the true cost of borrowing.

Lenders have been told they must add in the cost of payment protection insurance (PPI) when publishing APRs. Some lenders offer low interest rates but only if borrowers take out payment protection insurance. In one case a loan without insurance was offered at an APR of 12.6%.

The same loan with insurance was quoted at 10.4%. But if the insurance had been reflected in the total cost of credit, the APR would have been 19.7%.

Minimum APRs can only be published if the typical APR is also published. And greater prominence must be given to the typical rate. One lender quoted personal loan rates 'from only 9.9% APR'. When a consumer telephoned asking for a loan, an APR of 14.8% was quoted.

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