QUESTION
We have loan officers that speak to consumers by phone or
face-to-face and are constantly being asked the interest rate by these
consumers. But we do not know if they are supposed to be quoting just the interest
rate or also the Annual Percentage Rate (APR). Should we provide the interest
rate in terms of the APR?
ANSWER
If a creditor responds orally to a consumer’s inquiry about
the cost of credit, such as by phone or face-to-face, only the APR may be stated,
with the exception that the creditor may, but is not required to, state the
simple annual rate or periodic rate if the rate is applied to an unpaid
balance.
However, if the APR cannot be determined in advance, the APR
for a sample transaction must be stated, and other cost information for the
consumer’s specific transaction may be given.
[12 CFR § 226.26(b)]
Jonathan Foxx
President & Managing Director
Lenders Compliance Group
