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CHAPTER 6

THE COST OF CREDIT

6.1APR:The Statutory Yardstick
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You will recall, from Section 2.4.1, False or Misleading Statements, that:

if a person offering to supply goods of any description or provide any services…… gives by any means a false or misleading indication of —

(a)

the price or charge for the goods, (or) services ……

(b)

any charge for installation of or servicing of the goods ……

—— he shall be guilty of an offence.


This offence, for giving, by any means, a false or misleading indication of the price or charge for goods, or services, was given Statutory effect in Ireland under the Consumer Information Act 1978 and in The United Kingdom under the Consumer Protection Act 1987.



But the means by which the consumer may be misled can be both subtle and covert. An understanding of the fact that what is being presented is misleading may only rest within the particular field of knowledge of the party offering the product or service. This is particularly the case with the means by which critical investment or credit information, pertaining to a financial product offer, is presented to the consumer by a Financial Institution. 

Bear in mind that it is the Financial Institution that has full command, both of the 'financial parameters' information pertaining to the particular financial product, and of the means by which that information is given to the consumer!  



The 'means by which a Financial Institution indicates the interest rate charge for the cost of credit' constitutes a 'means by which a false or misleading indication of the price or charge for the credit' can be given to the consumer.



The expression: 'By any means' is totally non-limiting in respect of what it defines.


It MEANS  'by any means whatsoever' .


This includes:  choosing to remain silent with respect to material information that would enable the consumer to make an informed decision regarding the particular financial product being offered to him. 

 

All this said, in Ireland, as we have seen in Section 2.4.1, 'banking business' was exempt from the provisions of the Consumer Information Act 1978.

This meant that Irish Financial Services Institutions could continue to sanction the use of false and misleading statements to induce consumers / customers to enter into Credit Agreements with them, safe in the knowledge that the Competent Authority, the Central Bank, would do nothing to address the matter.


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In the U.K., specific Regulations to make provision for ascertaining the true cost to debtors of credit provided, or to be provided, under actual or prospective consumer credit agreements were passed into Law in 1980 under the Consumer Credit (Total Charge for Credit) Regulations 1980. The primary Act governing these Regulations was the U.K. Consumer Credit act 1974.


These Regulations required that the total cost of credit be expressed as an annual percentage of the amount of credit granted and specified the manner in which this ‘annual percentage rate of charge’ (APR) should be calculated.



Further consolidation of the critical status of the indication of the APR was provided for within U.K. legislation under the Consumer Credit (Quotations) Regulations 1989 and the Consumer Credit (Advertisements) Regulations 1989.


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In Ireland, the Consumer Information (Consumer Credit) Order 1987 also ratified the importance of indicating the APR and specified how the APR was to be calculated. But this Order was just specific to 'advertisements'.

The Consumer Information (Consumer Credit) Order 1987 was issued by the Irish legislature under power of the Consumer Information Act 1978 —— 'after consultation with such persons as appeared [to the Minister in charge] to be substantially interested in the general subject matter of the Order'.

This meant that, in the full knowledge that the most important Credit Agreements for the general public were with Financial Institutions engaged 'banking business', the Irish legislature, influenced by its Competent Authority, The Central Bank, once again, kowtowed to the interests of those within the Financial Services Industry and exempted these Financial Institutions from the statutory requirements with regard to the indication of APR.

In Ireland, legislation with respect to the indication of APR by those engaged in 'banking business' was not given statutory effect until the enactment of the Consumer Credit Act 1995, and, even at this point, the legislation was confined to dealings with consumers.

 

However, notwithstanding the limitations of the Consumer Information Act 1978 (see Section 2.4.1, False or Misleading Statements) in the matter of its exemption of 'banking business' from the scope of its provisions, and the limitations of the Consumer Information (Consumer Credit) Order 1987 in that (while its title would lead one to expect otherwise) it confined its scope to 'advertisements', ——— there can be no doubt but that there was a full and conscious knowledge, among the Management Personnel of all Financial Services Institutions in Ireland, that the omission of the relevant APR from a credit offer to a consumer was a means by which a false or misleading indication of the price or charge for the goods, or services, being offered could be given to the consumer.

 

Note! There is no limit set to the meaning of ‘advertisement’ for the purposes of the Consumer Information (Consumer Credit) Order 1987. In this regard, the meaning of ‘advertising’ as being ‘the making of a representation in any form in order to promote the supply of goods or services’, as defined in the 1984 European Council Directive (see Section 2.4.2: Misleading Advertising), can therefore be seen as giving definition to the term ‘advertisement’, this definition being in conformity with the stated purposive intent of the Order.

 

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There was no indication of the APR on any of the Mortgage Quotations presented to me, or to my wife and I, by First National / Irish life.

 

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