Flat interest, total interest, annuity, management fee – all these are terms that might easily confuse anyone looking for a consumer credit and comparing the offers on the market. Things will get simpler next year.
Embracing the model promoted in the United States and Western Europe, the National Association for Consumer Protection has prepared a law draft binding all store operators to “speak the same language.”
The effective annual percentage rate (APR) will be, as stipulated in the new law draft, the common denominator of every advertisement of the stores that sell goods in instalments, no matter if it is run on TV or it is about promotional materials used in stores.
Although agreeing to the introduction of a measure to unify the costs entailed by a consumer credit contract in principle, the store operators have a few objections to make.
“Mentioning APR in the commercial messages from companies will work as a psychological inhibitor for clients, because that percentage will be unavoidably a bit higher than the interest currently specified. Anyway, we believe that the really important thing for clients is still the uniform instalment for a specific credit maturity above anything else, because the two elements (the instalment value and the number of instalments) provide a comprehensive information package,” Marius Ghenea, Flanco retail chain general manager, feels.
At present, the decision to buy something in instalments is mainly made in line with the actual amount of the instalment, so that very few clients are actually aware of the total credit cost.
Retailer Altex’ representatives say improved transparency in offers will be good. “The law draft benefits the consumer, who has to have all the accurate details, considering the wide range of credits they can choose from. The APR is a solution for the market to become transparent,” they say.
There will, however, be loopholes allowing vendors to bend the law. “No matter what interest or annual cost we tell them, it will still be a partial information, because a store could artificially increase the shelf price just to boast a lower APR, which does not mean the retailer goes against the “APR Law”, yet the clients would be misled, cheated in this case,” Ghenea added.
At present, there are still stores displaying both the total interest and the annual percentage rate promoted as the “real” interest. The “real” interest is calculated as a ratio between the amount paid and the amount borrowed. For instance, the cumulated instalments for a 10 million ROL loan repaid in equal monthly instalments in a year amount to 11.35 million, which means the “extra” is 1.35 million ROL.
ionut.bonoiu@zf.ro