Appendix F to Part 226 - Optional Annual Percentage Rate Computations for Creditors Offering Open-End Plans Subject to the Requirements of § 226.5b
12:3.0.1.1.7.9.8.1.21 : Appendix F
Appendix F to Part 226 - Optional Annual Percentage Rate
Computations for Creditors Offering Open-End Plans Subject to the
Requirements of § 226.5b
In determining the denominator of the fraction under §
226.14(c)(3), no amount will be used more than once when adding the
sum of the balances 1 subject to periodic rates to the sum of the
amounts subject to specific transaction charges. (Where a portion
of the finance charge is determined by application of one or more
daily periodic rates, the phrase “sum of the balances” shall also
mean the “average of daily balances.”) In every case, the full
amount of transactions subject to specific transaction charges
shall be included in the denominator. Other balances or parts of
balances shall be included according to the manner of determining
the balance subject to a periodic rate, as illustrated in the
following examples of accounts on monthly billing cycles:
1 [Reserved]
1. Previous balance - none.
A specific transaction of $100 occurs on the first day of the
billing cycle. The average daily balance is $100. A specific
transaction charge of 3 percent is applicable to the specific
transaction. The periodic rate is 1 1/2 percent applicable to the
average daily balance. The numerator is the amount of the finance
charge, which is $4.50. The denominator is the amount of the
transaction (which is $100), plus the amount by which the balance
subject to the periodic rate exceeds the amount of the specific
transactions (such excess in this case is 0), totaling $100.
The annual percentage rate is the quotient (which is 4 1/2
percent) multiplied by 12 (the number of months in a year), i.e.,
54 percent.
2. Previous balance - $100.
A specific transaction of $100 occurs at the midpoint of the
billing cycle. The average daily balance is $150. A specific
transaction charge of 3 percent is applicable to the specific
transaction. The periodic rate is 1 1/2 percent applicable to the
average daily balance. The numerator is the amount of the finance
charge which is $5.25. The denominator is the amount of the
transaction (which is $100), plus the amount by which the balance
subject to the periodic rate exceeds the amount of the specific
transaction (such excess in this case is $50), totaling $150. As
explained in example 1, the annual percentage rate is 3 1/2 percent
× 12 = 42 percent.
3. If, in example 2, the periodic rate applies only to the
previous balance, the numerator is $4.50 and the denominator is
$200 (the amount of the transaction, $100, plus the balance subject
only to the periodic rate, the $100 previous balance). As explained
in example 1, the annual percentage rate is 2 1/4 percent × 12 = 27
percent.
4. If, in example 2, the periodic rate applies only to an
adjusted balance (previous balance less payments and credits) and
the consumer made a payment of $50 at the midpoint of the billing
cycle, the numerator is $3.75 and the denominator is $150 (the
amount of the transaction, $100, plus the balance subject to the
periodic rate, the $50 adjusted balance). As explained in example
1, the annual percentage rate is 2 1/2 percent × 12 = 30
percent.
5. Previous balance - $100.
A specific transaction (check) of $100 occurs at the midpoint of
the billing cycle. The average daily balance is $150. The specific
transaction charge is $.25 per check. The periodic rate is 1 1/2
percent applied to the average daily balance. The numerator is the
amount of the finance charge, which is $2.50 and includes the $.25
check charge and the $2.25 resulting from the application of the
periodic rate. The denominator is the full amount of the specific
transaction (which is $100) plus the amount by which the average
daily balance exceeds the amount of the specific transaction (which
in this case is $50), totaling $150. As explained in example 1, the
annual percentage rate would be 1 2/3 percent × 12 = 20
percent.
6. Previous balance - none.
A specific transaction of $100 occurs at the midpoint of the
billing cycle. The average daily balance is $50. The specific
transaction charge is 3 percent of the transaction amount or $3.00.
The periodic rate is 1 1/2 percent per month applied to the average
daily balance. The numerator is the amount of the finance charge,
which is $3.75, including the $3.00 transaction charge and $.75
resulting from application of the periodic rate. The denominator is
the full amount of the specific transaction ($100) plus the amount
by which the balance subject to the periodic rate exceeds the
amount of the transaction ($0). Where the specific transaction
amount exceeds the balance subject to the periodic rate, the
resulting number is considered to be zero rather than a negative
number ($50 − $100 = −$50). The denominator, in this case, is $100.
As explained in example 1, the annual percentage rate is 3 3/4
percent × 12 = 45 percent.
[75 FR 7824, Feb. 22, 2010]