Why APR Matters: Truth In Lending

Seattle Medium
August 18, 2010
Crowell, Charlene

Payday and title lenders will do anything to keep their annual interest rates of up to 400 percent under wraps, including vehemently denying that annual percentage rate (APR) is important and that the loans may take months if not years to repay as a result of exorbitant fee charges. However, the Truth in Lending Act (TILA), enacted more than four decades ago, was intended to ensure that all lenders disclose the APR for all types of loans in order to allow consumers to shop competitive prices and enter into transactions they could understand and afford. Despite TILA’s federal mandate, unscrupulous lenders have promoted their products on a fee basis, rather than APR -- a practice that continues today and is especially rampant in communities of color, where payday and title lending stores are more highly concentrated. This practice became so common that the Federal Reserve Board clarified that APR disclosures were specifically required for payday loans, cash advances, deferred deposit checks, and other similar products. Charlene Crowell, a communications official with the Center for Responsible Lending, writes, "As an organization pledged to building family wealth and opposing predatory lending in all of its forms, the Center for Responsible Lending is encouraged that 16 states and the District of Columbia have effectively banned triple-digit interest on payday lending. CRL is further encouraged by the state attorney generals who are enforcing their rate caps by litigating against Internet payday lenders."
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