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Quoting Rates: Ranges vs. Actual APR
Answer by Andy Zavoina and Jim Bedsole, BOL Gurus

QUESTION: We are having a debate on how we are to quote rates to clients. My understanding is that we are to quote APR's to customers, however there are a few loan officers who say that an APR range is acceptable. What does the Reg say?

ANSWER by Andy Zavoina:
BIO AND CONTACT INFO
Ranges do not qualify. You may quote a rate example. Here is the cite as it applies to open and closed credit: §226.26 Use of annual percentage rate in oral disclosures.

(a) Open-end credit. In an oral response to a consumer’s inquiry about the cost of open-end credit, only the annual percentage rate or rates shall be stated, except that the periodic rate or rates also may be stated. If the annual percentage rate cannot be determined in advance because there are finance charges other than a periodic rate, the corresponding annual percentage rate shall be stated, and other cost information may be given.

(b) Closed-end credit. In an oral response to a consumer’s inquiry about the cost of closed-end credit, only the annual percentage rate shall be stated, except that a simple annual rate or periodic rate also may be stated if it is applied to an unpaid balance. If the annual percentage rate cannot be determined in advance, the annual percentage rate for a sample transaction shall be stated, and other cost information for the consumer’s specific transaction may be given.

ANSWER by Jim Bedsole:
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  1. Quoted rates must actually be available--no bait & switch.
  2. Representative amounts may be quoted in an electronic advertisement (like a webpage), so long as the table includes the higher priced services.
  3. Rates must be expressed as APRs, however simple rates may be included along with the corresponding APR--provided the simple rate is no more prominent.


First published on BankersOnline.com 2/4/02


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