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Directive 2008/48/EC Of the European Parliament and of the CouncilShow full title

Directive 2008/48/EC Of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC

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ANNEX I

I.The basic equation expressing the equivalence of drawdowns on the one hand and repayments and charges on the other.

The basic equation, which establishes the annual percentage rate of charge (APR), equates, on an annual basis, the total present value of drawdowns on the one hand and the total present value of repayments and payments of charges on the other hand, i.e.:

where:

  • X

is the APR,
  • m

is the number of the last drawdown,
  • k

is the number of a drawdown, thus 1 ≤ k ≤ m,
  • Ck

is the amount of drawdown k,
  • tk

is the interval, expressed in years and fractions of a year, between the date of the first drawdown and the date of each subsequent drawdown, thus t1 = 0,
  • m’

is the number of the last repayment or payment of charges,
  • l

is the number of a repayment or payment of charges,
  • Dl

is the amount of a repayment or payment of charges,
  • sl

is the interval, expressed in years and fractions of a year, between the date of the first drawdown and the date of each repayment or payment of charges.

Remarks:

(a)

The amounts paid by both parties at different times shall not necessarily be equal and shall not necessarily be paid at equal intervals.

(b)

The starting date shall be that of the first drawdown.

(c)

Intervals between dates used in the calculations shall be expressed in years or in fractions of a year. A year is presumed to have 365 days (or 366 days for leap years), 52 weeks or 12 equal months. An equal month is presumed to have 30,41666 days (i.e. 365/12) regardless of whether or not it is a leap year.

(d)

The result of the calculation shall be expressed with an accuracy of at least one decimal place. If the figure at the following decimal place is greater than or equal to 5, the figure at that particular decimal place shall be increased by one.

(e)

The equation can be rewritten using a single sum and the concept of flows (Ak), which will be positive or negative, in other words either paid or received during periods 1 to k, expressed in years, i.e.:

,

S being the present balance of flows. If the aim is to maintain the equivalence of flows, the value will be zero.

II.Additional assumptions for the calculation of the annual percentage rate of charge

(a)

if a credit agreement gives the consumer freedom of drawdown, the total amount of credit shall be deemed to be drawn down immediately and in full;

(b)

if a credit agreement provides different ways of drawdown with different charges or borrowing rates, the total amount of credit shall be deemed to be drawn down at the highest charge and borrowing rate applied to the most common drawdown mechanism for this type of credit agreement;

(c)

if a credit agreement gives the consumer freedom of drawdown in general but imposes, amongst the different ways of drawdown, a limitation with regard to the amount and period of time, the amount of credit shall be deemed to be drawn down on the earliest date provided for in the agreement and in accordance with those drawdown limits;

(d)

if there is no fixed timetable for repayment, it shall be assumed:

(i)

that the credit is provided for a period of one year; and

(ii)

that the credit will be repaid in 12 equal instalments and at monthly intervals;

(e)

if there is a fixed timetable for repayment but the amount of such repayments is flexible, the amount of each repayment shall be deemed to be the lowest for which the agreement provides;

(f)

unless otherwise specified, where the credit agreement provides for more than one repayment date, the credit is to be made available and the repayments made on the earliest date provided for in the agreement;

(g)

if the ceiling applicable to the credit has not yet been agreed, that ceiling is assumed to be EUR 1 500;

(h)

in the case of an overdraft facility the total amount of credit shall be deemed to be drawn down in full and for the whole duration of the credit agreement. If the duration of the credit agreement is not known the annual percentage rate of charge shall be calculated on the assumption that the duration of the credit is three months;

(i)

if different interest rates and charges are offered for a limited period or amount, the interest rate and the charges shall be deemed to be the highest rate for the whole duration of the credit agreement;

(j)

for consumer credit agreements for which a fixed borrowing rate is agreed in relation to the initial period, at the end of which a new borrowing rate is determined and subsequently periodically adjusted according to an agreed indicator, the calculation of the annual percentage rate shall be based on the assumption that, at the end of the fixed borrowing rate period, the borrowing rate is the same as at the time of calculating the annual percentage rate, based on the value of the agreed indicator at that time.

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