Abstract
Most people have consumer loans during their lives, making it important that consumer credit legislation is effective. Legislation in many countries is based on the US Truth-in-Lending Act (TILA). Conventional financial analysis underlying the TILA argues that the annual percentage rate (APR) is the best measure of credit cost, and therefore the legislation focuses on APR as a key policy variable. APR is a complicated concept, so the legislation is complex and research shows consumers find APR confusing. Th is chapter uses multiple-interest-rate analysis to challenge conventional analysis and demonstrate that the simple rate of interest is a more eff ective policy variable than APR.KeywordsAnnual percentage rateAPRconsumer creditcomplex planetime value of moneyfinance chargemultipletruth-in-lendingTVM
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