Delay in AAPR true rate disclosure
Consumers will have to wait until the middle of 2003 until “comparison rate” advertising on loans is introduced. Australia's consumer affairs ministers have voted to grant the banks an extension until July 1 2003 to introduce the annualised average percentage rate (AAPR), which will force lenders to advertise the real costs of loans – including charges and fees – as a single percentage rate.
Comparison rate advertising is intended to help consumers avoid being trapped in loans that are loaded with hidden fees but appear to have low interest rates.
It is believed that the delay in introducing the AAPR was due to pressure from banks and some states not passing relevant legislation in time. The Australian Bankers' Association, which is opposed to the proposed regulations, says that banks will have to undergo huge internal changes before the AAPR can be introduced and that hasn't been possible this year.
An ABA director, Ian Gilbert, stated yesterday that the AAPR won't include the cost of third parties, such as finance brokers, and doesn't take into account any other benefits of higher-fee loans. Consumers won't end up with “apples to apples” loan comparisons, he said, and although the AAPR looks to the casual observer to be simple, there is a fairly complex situation sitting behind it.
But Wizard's executive chairman Mark Bouris said the banks have known about the introduction of AAPR for some time and they are in “go-slow mode”. Introductory rate loans, with low interest rates and large hidden fees, will suddenly make a reappearance during the peak lending Spring season, he said. These loans were taken out of the market after the initial announcement about the AAPR, but they'll return now due to the delay in its introduction.