Credit charges and APR

The Consumer Credit Act 1974 lays down rules about the annual percentage rate of charge (APR).

The APR must be included in credit agreements and pre-contract information. A typical APR must be included in most credit advertisements. This is intended to help consumers to compare the cost of different credit deals.

The APR is based on the total charge for credit (TCC) which includes interest and other charges which affect the cost of borrowing - even if they are not payable under the credit agreement itself. The APR is an annualised rate reflecting the timing of such charges, as well as the rates and amounts.

The rules for the calculation of the TCC and APR are set out in the Consumer Credit (Total Charge for Credit) Regulations 1980. These include a number of assumptions which must be used where information is unknown or cannot be calculated accurately.

In the case of credit cards and other running-account credit, the assumptions are modified by the Consumer Credit (Advertisements) Regulations 2004 and the Consumer Credit (Agreements) Regulations 1983 as amended in 2004.

The Advertisements Regulations, amendments to the Agreements Regulations, and further amendments can be found on the Office of Public Sector Information website.

The OFT has produced a booklet setting out how an APR should be calculated. Download Credit Charges and APR (pdf 238 kb).

We have also produced guidance (pdf 272 kb) on the credit advertising regulations.

If there are any queries on the regulations these should be addressed to credit.guidance@oft.gsi.gov.uk.

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