Thanks rate-tart,

A very good idea, and we'll definitely look at it - thanks. I only really hinted at this in my last post, but we're looking at the wording on a daily and weekly basis to ensure clarity and value for consumers as well as legal compliance. As I'm sure you appreciate, it's a tricky balancing act! But it's still early days and I'll definitely keep you updated with how we get on and be happy to make sure your comments are heard by both our editorial and compliance teams. Don't forget to let the Office of Fair Trading know your thoughts and opinions, too! They're responsible for enforcing the CCD, so I'm sure they're keen to hear consumer comments, thoughts and insights too.

Thanks again,
Graeme
Community Editor
graeme.delap@moneysupermarket.com

Thanks for that Graeme but I just wonder whether, in the spirit of being informative, MSM might just give the purchase rate and explain that any additional fees (e.g. annual card fee, balance-transfer fee, etc.) will increase the effective APR. I feel sure that readers of the Alerts would find that more enlightening than the slavish adherence to the EU directive which, I presume, is aimed at lenders rather than consumer discussion forums (fora ?).

Hi rate-tart - Very good question!

It's part of the Consumer Credit Directive (CCD) which came into force on February 1st of this year. Before the CCD, you would be used to seeing 'typical' APR against a credit card. This referred to the rate that 66% - or two-thirds - of customers must be offered. The new 'representative' APR refers to a rate that 51% of customers must receive. This is a requirement of the CCD (yes - it's showing a rate that fewer people have to receive!).

The 'representative example' text is there to help with the decision-making process: showing the amount of credit, the borrowing rate, any charges that are included in the total charge for credit and, in the case of credit in the form of a deferred payment for specific goods, services, land or other things, the cash price and details of any advance payment.

The aim is to improve transparency so that it is easier for individuals to compare credit products and make a well-informed decision about whether or not the credit on offer suits their needs and financial circumstances.

I have heard that this is part of a EU-wide directive to bring all member states into some form of alignment with regard to advertising credit - some countries apparently didn't have a requirement to show any form of 'typical' or 'representative' APR, so it's a leap forwards for them, though I'm sure it could be argued that it's less useful for UK consumers. I hope that helps a little. It's worth pointing out that while it's a legal requirement, we're working to ensure that the text gives consumers relevant and useful information while at the same time remains compliant.

You can read more in our article: The Consumer Credit Directive: What does it mean for you?

Thanks again,
Graeme
Community Editor

Hi folks,

Just a brief question to the email authors.

Reading the MoreMoney alert of 23/03 /2011 there is an "explanation" under the MBNA American Express Card with Cashback entry which reads "Representative example: If you spend £1,200 at a purchase interest rate of 18.9% (variable), your annual Representative APR will be 18.9% (variable)" ; is this supposed to have some useful meaning?