What is the APRC?
This is an abbreviation for the “Annual Percentage Rate of Charge”. The APRC summarises the overall costs of consumer credit to the consumer expressed as an annual percentage share of the total amount of the consumer credit. The APRC was introduced to enable more objective assessment of the costs and benefits of consumer credit to consumers and to facilitate comparison between offers from different financial institutions. The annual borrowing rate alone does not provide a sufficiently faithful picture of the total costs of consumer credit, as it does not reflect additional consumer credit-related costs that the consumer has to pay. By contrast, the calculation of the APRC takes into account the following in addition to the borrowing rate and the structure of principal and interest payments:
- fees for assessing the application for consumer credit,
- fees relating to the conclusion of the contract (e.g. administrative fees),
- fees for the transfer of money and fees for credit account maintenance,
- payments for insurance or guarantees in the event of the consumer being unable to repay owing to sickness, disability, death or unemployment, where this is a condition for the provision of consumer credit,
- payments of commissions.
The Consumer Credit Act stipulates that all entities offering or providing consumer credit as part of their business activity or the independent performance of their profession must inform the consumer about the level of the APRC. This information must be included not only in advertising (if any information about the costs of the credit is provided), but also in the information obligatorily provided before the conclusion of the contract on consumer credit and in the contract itself. In the pre-contractual information, the APRC must also be explained using a representative example.