§ 14A-2-304. Calculation of rate to be disclosed.

(1)  Except as otherwise specifically provided, if a seller is required to give to a buyer a statement of the rate of the credit service charge he shall state the rate in terms of an annual percentage rate as defined in subsection (2) or in terms of a corresponding nominal annual percentage rate as defined in subsection (3), whichever is appropriate.

(2)  "Annual percentage rate"

(a)with respect to a consumer credit sale other than one made pursuant to a revolving charge account, is either

(i)that nominal annual percentage rate which, when applied to the unpaid balances of the amount financed calculated according to the actuarial method, will yield a sum equal to the amount of the credit service charge; or

(ii)that rate determined by any method prescribed by rule by the Administrator as a method which materially simplifies computation while retaining reasonable accuracy as compared with the rate determined pursuant to subparagraph (i);

(b)with respect to a consumer credit sale made pursuant to a revolving charge account, is the quotient expressed as a percentage of the total credit service charge for the period to which it related divided by the amount upon which the credit service charge for that period is based, multiplied by the number of these periods in a year.

(3)  "Corresponding nominal annual percentage rate" is the percentage or percentages used to calculate the credit service charge for one billing cycle or other period pursuant to a revolving charge account multiplied by the number of billing cycles or periods in a year.

(4)  If a seller is permitted to make the same credit service charge for all amounts financed within a specified range (subsection (5) of Section 2-201) or for all balances within a specified range (subsection (2) of Section 2-207), he shall state the annual percentage rate or corresponding nominal annual percentage rate, whichever is appropriate, as applied to the median amount of the range within which the actual amount financed or balance is included.

(5)  A statement of rate complies with this part if it does not vary from the accurately computed rate by more than the following tolerances:

(a)the annual percentage rate may be rounded to the nearest quarter of one percent (1/4 of 1%) or may fall within a tolerance not greater than one-eighth of one percent (1/8 of 1%) more or less than the actual rate for consumer credit sales payable in substantially equal installments when a seller determines the total credit service charge on the basis of a single add-on, discount, periodic, or other rate, and the rate is converted into an annual percentage rate under procedures prescribed by rule by the Administrator;

(b)the Administrator may authorize by rule the use of rate tables or charts which may provide for the disclosure of annual percentage rates which vary from the rate determined in accordance with paragraph (a) by not more than the tolerances the Administrator may allow; the Administrator may not allow a tolerance greater than eight percent (8%) of that rate except to simplify compliance where irregular payments are involved; and

(c)in case a seller determines the annual percentage rate in a manner other than as described in paragraph (a) or (b), the Administrator may authorize by rule other reasonable tolerances.

Added by Laws 1969, c. 352, § 2-304, eff. July 1, 1969.  Amended by Laws 1982, c. 335, § 15, operative Oct. 1, 1982.