Center for Responsible Lending releases new issue brief explaining Annual Percentage Rate and payday lending.

24 06 2009

Interest rate disclosures allow apple-to-apple comparisons, protect free market competition

New Issue Brief, APR Matters on Payday Loans, now availble from the Center for Responsible Lending.

Loan terms are often complex and may include a number of extra fees that make the real cost to the borrower difficult to decipher and difficult to compare across credit options. Congress developed the APR, or Annual Percentage Rate of Interest, as a standard measure that calculates the simple interest rate on an annual basis (including most fees), accounts for the amount of time the borrower has to repay the loan, and factors in the reduction in principal as payments are made over time.

For centuries, the standard has been to compare interest rates on an annual basis, whether the loan is scheduled to be paid off in less than one year, more than one year, or in multiple years. U.S. consumer lending law applies this measure across the board, whether for car loans, mortgage loans, cash advances on credit cards, or payday loans.

Issue Brief Overview:  The new issue brief includes an example of a payday loan contract showing the 456.25% APR charged. This is a valuable addition to the advocacy tools needed to combat the industry assault on a bedrock consumer protection.

Read the full issue brief and view video at CRL’s website:

View or download the Center’s new issue brief, “APR Matters on Payday Loans” at CRL’s website:




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