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An essay on the inadequacy of APR as a measure of the cost of consumer credit, and why consumer credit legislation should be revised

journal contribution
posted on 2023-06-08, 05:42 authored by Mike Osborne
This article maintains annual percentage rate (APR) is not the best measure of loan cost and therefore its central role in consumer credit legislation should end. Legislation in many countries is based on the US Truth-in-Lending Act. The legislation is complex because APR is designated the best measure of cost. Research shows consumers find APR confusing and prefer a simpler measure, the finance charge. Conventional analysis argues APR is the best measure and should retain its key role. In this article, mathematical arguments are deployed to challenge conventional analysis by demonstrating APR is an inadequate and misleading measure of loan cost.

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  • Published

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  • Business and Management Publications

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  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2013-04-24

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