Annual Percentage Rate

The APR is an annualised rate which reflects the total cost of borrowing for the customer – and thereby helps customers to compare the cost of different credit deals.     

The APR must be shown as “%APR” to one decimal place.  Where it is subject to change it must be accompanied by the word “variable” but where it is fixed, it is it is good practice to state this.

Where a financial communication for a credit agreement includes a rate of interest or an amount relating to the total, it must also include a representative example containing the nature and amount of any other charge(s) included in the total cost of credit to the borrower:

  • the rate of interest and whether it is fixed or variable or both, expressed as a fixed or variable percentage applied on an annual basis to the amount of credit drawn down;
  •  the nature and amount of any other charge included in the total charge for credit drawn down;
  • the total amount of credit;
  • the representative APR;
  • in the case of credit in the form of a deferred payment for specific goods, services, land or other things, the cash price and the amount of any advanced payment;
  • the duration of the agreement;
  • the total amount payable; and
  • the amount of each repayment of credit.

How should a representative example be provided?

The information provided in the representative example must be clear and concise, and presented so that each item of information is easy to understand. As a whole, the information must be given greater prominence than any other information relating to the cost of credit in the communication/promotion. Typically, promotions for lease and hire agreements do not need to provide an APR under CONC.

When should a representative example be provided?

The content of a promotion will determine whether a Representative APR can be shown alone or whether it must be shown as part of the Representative Example.

 Examples of when and where to include either the representative APR or the representative example can be quite complex. As a general rule of thumb, if any financial promotion contains a monthly payment (with the exception of true 0% APR) then a full representative example must also be included.

Full details relating to financial promotions can be found in CONC 3 here