Loan Fees & APR
Answer by Andy Zavoina and Richard Insley, BOL Guru
Question: When you have a loan administrative fee or a loan fee how do you disclose the APR? The fee is not included in with the amount financed, but is included in with the finance charge and it does raise the APR. For example a loan of $4,000.00 at a rate of 6.90%, $20.00 loan administrative fee, has an APR of 7.1596%. A loan at $5,000.00 at a rate of 6.90%, $20.00 loan fee, has an APR of 7.1061%. If you are running a loan special what APR do you use if they are different?
Answer by Andy Zavoina: BIO AND CONTACT INFO
You are correct that the admin fee needs to be included in your advertising.
§226.24 Advertising.
4. Use of examples. Footnote 49 authorizes the use of illustrative credit transactions to make the necessary disclosures under §226.24(c)(2). That is, where a range of possible combinations of credit terms is offered, the advertisement may use examples of typical transactions, so long as each example contains all of the applicable terms required by §226.24(c). The examples must be labeled as such and must reflect representative credit terms that are made available by the creditor to present and prospective customers.
Answer by Richard Insley: BIO AND CONTACT INFO
Use a typical loan amount and resist the temptation to use a large loan example that dilutes the effect of the flat fee.
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