Deputy O'Keeffe has quite properly identified this as a major issue. Since he raised it last Thursday I have looked at it further and I agree with him. It is fundamental to what we seek to do in the Bill. He says he is no expert but my observations are that he knows a great deal more about it than most of us. The previous Minister is on record as saying on Committee Stage that she did not understand it and most of us said we did not understand the mathematical calculation on page 82. I am committed to looking at this when the Bill goes to the Seanad and at the point raised by Deputy O'Keeffe regarding charges and whether they should be included.
I do not know what Deputy O'Keeffe would say if I asked him to ruminate on the following definition: "APR is that effective rate of interest quoted as an annual rate which, when expressed as a decimal and used to discount repayments made by the borrower over the term of the loan, gives a total present value of such repayments equal to the amount of the loan advanced". That has the merit of being brief and concise. I do not want to go into the mathematical equation on page 82 and whether it is accurate or intelligible. That is for another day. It is necessary at this stage to give verbal expression to that mathematical formula. That is what the Deputy seeks to achieve so that consumers who borrow from banks or building societies know that APR means the same thing and that there is a common and accurate definition of what it means. As the Deputy said, products are advertised in the public press apparently at different interest rates but the APR could be the same, alternatively, you could have different APRs but when you look at the rate of frequency, discounting and so on, the situation is not as it seems.
It ties into the area of misleading advertising. In indicating to Deputy O'Keeffe that I am having this fundamental area of the Bill examined, if we agree on a single, uniform, consistent definition of APR I do not see any good reason advertisements should not be required to express what they are offering in terms of the true APR rate. Consumers could make a real judgment between one offer and another. At present it is immensely confusing. If we carried out a vox pop in the street few people could say precisely what APR means. In trying to work out something accurate it was suggested to me that the true rate of interest is the rate of discount expressed in annual percentage terms, in other words, the annualised percentage rate of APR which when applied to the total sum of repayments made on the loan over its lifetime including the repayment of principal but excluding any sums payable as a penalty, compensation or damages or, as Deputy O'Keeffe said, other charges unless required by regulation. In the moneylending business collections are made at the door and, therefore, collection charges are an issue. This equates the total amount of repayments made to the original value of the loan extended taking account of the amounts, timing and frequency of the debiting of instalments of amounts due for repayment and crediting of repayments made to the running account of the borrower.
I am determined to ensure only one definition of formulation of APR is used throughout the Bill. That may be expressed in long or short form as appropriate, but it is always the same definition. The expression of the mathematical formula must be consistent with this formulation. In other words, the formulation is no more than the mathematical formula expressed clearly in words. That would mean that charges which can vary from one lending institution to another would have to be expressed separately. The formula or formulation should concentrate on the financial APR. In other words, charges and so on should not be included as they can vary from one lending institution to another. In this regard and equally important, the APR should be the only rate a lending institution should be allowed to quote in publicity, advertisements, brochures and contract forms. No other rate should be allowed to be quoted or used thus enabling the consumer to compare like with like. I will table an amendment to give expression to this critical change. Furthermore, the APR used by lending agencies should be the only formulation contained in the Bill, no other formula or formulation should be allowed. That approach would allow total transparency and enable consumers to make real comparisons.