Our institution is going to be offering an alternative to pay day loans (yeah i know, i'm not thrilled about it)

The interest rate is 18%. On a $500.00 loan (which is payable in 30 days from issuance)there will be a $25.00 fee which includes doc tax. An additional $25.00 of the loan will be required to be put in a savings (and kept there) that earns .1498% until the loan is paid (hopefully 30 days). Net to borrower = $475.00. Will the APR be affected because of the earnings (be it as little as it is)of the $25.00 in the savings?

Bump

Be sure to have the disclosure required by 226.18(r):

(r) Required deposit. If the creditor requires the consumer to maintain a deposit as a condition of the specific transaction, a statement that the annual percentage rate does not reflect the effect of the required deposit.

You won't have to adjust the APR because of the deposit interest.

Thank you