S.I. No. 319/1987 - Consumer Information (Consumer Credit) Order, 1987.

S.I. No. 319 of 1987.

CONSUMER INFORMATION (CONSUMER CREDIT) ORDER, 1987.

WHEREAS it appears to the Minister for Industry and Commerce to be necessary or expedient in the interest of persons to whom goods, services, accommodation or facilities of any description are to be supplied or provided that advertisements or any class of advertisements of the goods, services, accommodation or facilities should contain or refer to any information to be specified in relation to the supply or provision of credit facilities.

WHEREAS it appears to the said Minister to be necessary or expedient in the interest of persons to whom goods, services, accommodation or facilities of any description are supplied or provided that the expression "annual percentage rate of charge" should be understood as having a definite meaning in relation to the supply or provision of credit facilities.

NOW, I, ALBERT REYNOLDS, Minister for Industry and Commerce, in exercise of the powers conferred on me by sections 11 and 12 of the Consumer Information Act, 1978 (No. 1 of 1978), as adapted by the Industry, Trade, Commerce and Tourism (Alteration of Name of Department and Title of Minister) Order, 1986 (No. 41 of 1986), and after consultation with such persons as appears to me to be substantially interested in the general subject matter of the Order following, hereby make this Order with respect to which, pursuant to section 26(4) of that Act, a draft has been laid before each House of the Oireachtas and a resolution approving of the draft has been passed by each such House:

1. (1) This Order may be cited as the Consumer Information (Consumer Credit) Order, 1987.

(2) This Order shall come into operation on the 10th day of March, 1988.

2. In this Order—

"annual percentage rate of charge" has the meaning assigned to it by Article 3 of this Order;

"cash price" means the price or charge at which a person indicates that he is or may be willing to sell or supply goods or services to cash purchasers, being a price or charge—

( a ) which, in relation to an advertisement, applies at the time at which the advertisement is published or, if a time is specified in the advertisement as a time at which the cash price applies, at that time,

( b ) which takes no account of—

(i) any discount available only to particular persons or to a particular class of persons in particular circumstances except where the advertisement is expressly directed to them, and

(ii) any discount available by virtue of the sale or supply of goods or services in a quantity or amount greater than the minimum quantity or amount which a person indicates that he is or may be willing to sell or supply except where the advertisement states the quantity or amount in respect of which the discount is available;

"cash purchaser" means, in relation to any advertisement, a person who, for a money consideration—

( a ) acquires the ownership of goods, or

( b ) is provided with services,

under a transaction which is not financed by credit;

"consumer" means a natural person acting outside his trade, business or profession;

"credit agreement" means an agreement whereby a creditor grants or promises to grant credit to a consumer, in the form of a deferred payment, a loan or other financial accommodation, and under which the consumer repays the credit, including any interest and charges; and an agreement for the supply of goods or the provision of services concluded with a consumer which is financed by means of a credit agreement between the supplier of the goods or the provider of the services and the consumer shall be deemed to be a credit agreement;

"creditor" means a person who grants credit in the course of his trade, business or profession;

"the relevant date" means the earliest date specified or determinable under a credit agreement on which the credit is made available to the consumer or, if a date is not so specified or determined under the agreement, the date of the agreement;

"running account credit" means a facility under a credit agreement whereby the consumer is enabled to receive, from time to time, from the creditor or a third party, cash, goods or services to an amount or value such that, taking into account payments made by or to the credit of the consumer, the credit limit (if any) is not at any time exceeded;

"typical amount of charge" means, in relation to the amount or rate of charge of any item mentioned in an advertisement in connection with any transaction, an amount or rate of charge which is typical of the items in transactions of that description entered into by that advertiser generally or, where the advertisement is directed towards natural persons of a particular class, with persons of that class:

3. (1) For the purposes of this Order and whenever this Order prescribes the use of the expression "annual percentage rate of charge", that expression shall mean the total cost of credit expressed as an annual percentage of the amount of credit granted and calculated in accordance with Article 4 of this Order.

(2) For the purposes of paragraph (1) of this Article,

( a ) the total cost of credit shall include—

(i) the total amount of interest on the credit payable under the agreement; and

(ii) all other charges at any time payable under the transaction or as a direct consequence of the agreement; and

( b ) the total cost of credit shall not include—

(i) any exceptional charges such as fines or penalties payable under the transaction to the creditor due to non-fulfilment of the contract by the consumer; and

(ii) ancillary costs such as maintenance charges on goods in a hire purchase agreement not imposed by the creditor.

4. (1) Subject to the provisions of paragraph (2) of this Article, the annual percentage rate of charge shall be calculated in accordance with the First Schedule to this Order to one decimal place, all further decimal places being disregarded.

(2) Where neither the time of the payments (including charges) nor the amount of the repayments is specified at the beginning of a credit agreement (including running account credit) the annual percentage rate of charge shall be calculated in accordance with the First Schedule to this Order making the assumptions set out in the Second Schedule to this Order.

5. This Order shall not apply—

( a ) where no interest or other charge is made for the provision of credit; or

( b ) to hiring agreements except where such agreements provide or allow for the title to pass ultimately to the hirer.

6. (1) Any advertisement in which it is indicated that credit may be provided or arranged by the advertiser and which purports to show the cost of credit or includes any claims in relation to the cost of credit shall also indicate—

( a ) the annual percentage rate of charge, or

( b ) if it is not practicable to show the annual percentage rate of charge, an example which is representative of the annual percentage rate of charge, and

( c ) where the advertisement relates to the provision of a good or a service, the cash price, the price payable under a credit agreement and the number and amount of instalments.

(2) An advertisement which refers directly or indirectly to the availability of credit, which is displayed at a premises where business is carried on, shall include the annual percentage rate of charge or, if it is not practicable to show the annual percentage rate of charge, an example which is representative of the annual percentage rate of charge.

(3) An advertisement to which this Order applies shall, if any security is required or is required in specific circumstances, state that such security is required.

(4) It shall not be an offence for a person to provide credit at a lower rate than the rate advertised under the provisions of this Article.

7. Where an advertisement, which refers directly or indirectly to the availability of credit, includes the amount or rate of charge for any good or service as an example of the terms and conditions which the advertiser is prepared to offer a consumer, the advertisement shall state that the amount or rate of charge is given as an example and that the amount or rate of charge so given is a typical amount or rate of charge.

8. Where a statement of the annual percentage rate of charge is included in any advertisement to which this Order applies, that statement shall be afforded in the advertisement—

( a ) greater prominence than a statement relating to any other rate of charge, and

( b ) no less prominence than a statement relating to—

(i) any period over which payment is to be made,

(ii) the amount of any advance payment or the fact that no advance payment is required, and

(iii) the amount, number or frequency of any other payments or charges (other than the cash price of the goods or services) or of any repayments.

SCHEDULE I

1. In relation to any credit agreement, the annual percentage rate of charge is a rate per annum compounding annually, expressed as a percentage such that—

(i) the sum of the values, as at the relevant date, of all repayments of credit and of the total cost of credit, and

(ii) the sum of the values, as at the relevant date, of all credit under the agreement,

would, when calculated at that rate be equal.

2. For the purposes of this Order the value as at the relevant date—

( a ) of a sum to be paid on or before that date is that sum, and

( b ) of a sum to be paid at a later date is such value as is given by the following formula:

Where

A = sum to be paid

t = the period from the relevant date to the date of payment of that sum, expressed in years or proportions thereof.

A day being taken as 1/365 of a year, a week being taken as 1/52 of a year, and a month being taken as 1/12 of a year

X = one plus where the rate of charge is expressed as a percentage.

3. The positive rate of charge nearest to zero shall for the purpose of this Order be taken as the correct rate.

Example

(i) A credit of £100 is provided and is to be repaid in four quarterly repayments of £26.56.

(ii) The credit (if necessary adjusted to its value as at the relevant date) to be provided is set out on one side of the equation and the repayments (adjusted to their values as at the relevant date) are set out on the other side.

In this case the repayments are due at the end of every quarter (i.e. every 3 months) The first repayment is made after 3/12ths of a year has expired, the second after 6/12ths of a year has expired and so on. [If there were five repayments, the fifth repayment would be after one year and three months i.e. 15/12ths of a year.]

which is the same as

(iii) The equation is then solved by substituting different values of X until the equation balances. In this case the equation balances when X = 1.102.

(iv) To convert this into the APR, subtract 1 and multiply by 100 to give an APR of 10.2%.

Period rate of charge

4. Notwithstanding paragraph 2 of this Schedule, in the case of credit agreements where the only charge for credit is a constant period rate of charge in respect of periods of equal length, the annual percentage rate of charge may be established by using the following formula—

100(XY^—1)

where

Y = the number of periods in a year in which the period rate of charge is charged.

X = 1 plus where the rate of charge is ex-expressed as a percentage.

Example

Period rate of charge of 7.25 per cent for 6 monthly periods (i.e. interest charge is compounded on a 6 monthly basis).

= 100 [1. 1502563 - 1]

= 100 [.1502563]

= 15%

SCHEDULE 2

Assumptions to be made when calculating the Annual Percentage Rate of Charge

(1) When the charges or the amount of the repayments are not specified at the time of the agreement:

( a ) where the time period of the credit is not specified the period shall be assumed to be one year.

( b ) where the amount of credit to be provided is not specified

(i) in the case of running account credit, where a credit limit is specified, it shall be assumed that the maximum amount of credit is provided for the duration of the agreement, and

(ii) in any other case, it shall be assumed that the amount provided shall be £100.

( c ) where charges are payable at an unspecified date after the agreement is signed it shall be assumed that they are payable at the beginning of the agreement.

(2) Where the consumer agrees to pay the creditor a sum specified in the agreement on specified occasions it shall be assumed that the consumer makes the minimum specified payment or payments and obtains no further credit.

GIVEN under my Official Seal, this 10th day of December, 1987.

ALBERT REYNOLDS,

Minister for Industry and

Commerce.

EXPLANATORY NOTE.

(1) The Order sets out legally binding definitions relation to Consumer Credit.

(2) The Order requires that any advertisement that makes reference to the cost of credit shall also indicate the true cost of that credit by means of an annual percentage rate of charge (APR).

(3) The Order provides that any credit offer displayed at a business premises shall include a statement of annual percentage rate of charge.

(4) If a credit offer or advertisement is linked to the purchase of goods or services, the annual percentage rate of charge, cash price, total credit price of the goods or services and the number and amount of instalments must be indicated.

(5) The Order provides that the requirements at (2), (3) and (4) above can be met by including representative examples, if no other means of indicating the APR is practicable. If a representative example is used to indicate the APR, the example must state that the rate of charge is given as an example.