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Is a bank required to spell out “annual percentage rate” in advertisements or can the bank simply use the abbreviation “APR?”

Yes, the bank may use APR. For open-end credit, Comment 1 to Section 1-26(c) provides, “Unlike the transactional disclosure of an annual percentage rate under §1026.18(e), the advertised annual percentage rate need not include a descriptive explanation of the term and may be expressed using the abbreviation APR.

For closed-end credit, and according to §1026.24(c), it might seem like the regulation would require banks to use the phrase “annual percentage rate” at least once in closed-end advertisements. The rule requires banks to state the rate as an annual percentage rate, “using that term.” On the other hand, the commentary allows credit unions to use the abbreviation “APR.”

“Advertised rates must be stated in terms of an annual percentage rate, as defined in §1026.22. Even though state or local law permits the use of add-on, discount, time-price differential, or other methods of stating rates, advertisements must state them as annual percentage rates. Unlike the transactional disclosure of an annual percentage rate under § 1026.18(e), the advertised annual percentage rate need not include a descriptive explanation of the term and may be expressed using the abbreviation APR…”

The rule and commentary appear to allow banks to use the abbreviation “APR” in advertisements without first spelling out “annual percentage rate” if the rate disclosed otherwise meets the Regulation Z definition of “annual percentage rate” and uses the proper formula for calculating the APR. (June 2019)

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