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Issued by: Financial Supervisory Commission, Executive Yuan
Date of issue: 2005/11/30
Ref. No.: Jin-Guan-Yin (3)-Zi-No. 0940030381
Subject: With regard to the "Examples for Calculation of Annual Percentage Rate of Total Finance Charges for Advertisement of Credit Products by Banks and Insurance Enterprises" (Draft) submitted by you, the draft is approved and on record after you have made changes in accordance with the instructions below.
Explanations:
1. This is a reply to your letter Ref. No. Quan-Shou-Xiao-Zi-3009 dated October 17, 2005.
2. The contents in dynamic advertisement for home equity line of credit or revolving line of credit as presented in Example 5 or for credit card as presented in Example 7 should follow the contents of their print advertisement by disclosing relevant fee standards to make it easier for the consumers to make price comparison.
3. With respect to the suggestion in Explanation 2 (3).1 of your letter, the revolving interest rate for credit card should still be disclosed in radio advertisement in light that radio advertisement targets a large number of unspecified people, not just the bank's credit card customers, and that the offers of lottery drawing and bonus or discount for credit card transactions are considered enticing content.
4. With respect to the suggestion in Explanation 2 (3).3 of your letter, given that if a bank or insurance enterprise has disclosed the maximum credit line for related products on their own website, it is tantamount to introducing or publicizing its products. Thus the annual percentage rate of related products should still be disclosed by website linkage or other means.
TO: The Bankers Association of the Republic of China
cc: The Life Insurance Association of the Republic of China
Attachment:
Examples for Calculation of Annual Percentage Rate of Total Finance Charges for Advertisement of Credit Products by Banks and Insurance Enterprises
I. For the purpose of producing advertising specimens, credit products are classified into two types - Installment loan and revolving line of credit. The basis for trial calculating the annual percentage rates (APR) for those two types of credit products is as follows:
┌─────────────────┬───────────┐
│Type │APR trial calculation │
│ │basis │
│ ├─────┬─────┤
│ │Loan │Loan │
│ │period │amount │
├─────┬───────────┼─────┼─────┤
│Installmen│Home loan │20 years │$2,000,000│
│loan ├───────────┼─────┼─────┤
│ │Home equity loan │7 years │$500,000 │
│ ├───────────┼─────┼─────┤
│ │Auto loan │5 years │$400,000 │
│ ├───────────┼─────┼─────┤
│ │Credit loan │5 years │$300,000 │
├─────┼───────────┼─────┴─────┤
│Revolving │Home equity line of │Use lending rate in │
│line of │credit or revolving │place of annual │
│credit │line of credit │percentage rate │
│ ├───────────┤ │
│ │Cash card │ │
│ ├───────────┼───────────┤
│ │Credit card │Use revolving interest│
│ │ │rate in place of │
│ │ │annual percentage rate│
└─────┴───────────┴───────────┘
II. Disclosed items for dynamic advertisement and print advertisement:
┌──┬───────────────────────────┐
│Type│Installment loan Revolving line of credit│
│of ├──┬───┬───┬───┬────┬───┬───┤
│loan│Home│Home │Auto │Credit│Home │Cash │Credit│
│ │loan│equity│loan │loan │equity │card │card │
│ │ │loan │ │ │line of │ │ │
│ │ │ │ │ │credit │ │ │
│ │ │ │ │ │or │ │ │
│Type│ │ │ │ │revolv │ │ │
│of │ │ │ │ │ │ │ │
│adv-│ │ │ │ │ │ │ │
│ert-│ │ │ │ │ │ │ │
│ise-│ │ │ │ │ │ │ │
│men │ │ │ │ │ │ │ │
├──┼──┴───┴───┴───┼────┼───┼───┤
│Dyn-│Annual percentage rate of │Lending │Lend- │Revol-│
│amic│total finance charges │rate, │ing │ving │
│adv-│ │related │rate, │inter-│
│ert-│ │fee │all │est │
│ise-│ │standard│fee │rate, │
│men │ │ │items │Cash │
│ │ │ │and │advan-│
│ │ │ │rates │ce │
│ │ │ │(*) │fees │
├──┼──────────────┼────┼───┼───┤
│Pri-│Loan amount, term, interest │Lending │Lendi-│Revol-│
│nt │rate, total fees, annual │rate, │ng │ving │
│adv-│percentage rate of total │related │rate, │inter-│
│ert-│finance charges │fee │all │est │
│ise-│ │standard│fee │rate, │
│men │ │ │items │Cash │
│ │ │ │and │advan-│
│ │ │ │rates │ce │
│ │ │ │(*) │inter-│
│ │ │ │ │est │
│ │ │ │ │rate, │
│ │ │ │ │cash │
└──┴──────────────┴────┴───┴───┘
＊：Follow the provisions in Paragraph 1, Article 11 of Points to Note for Financial Institutions Engaging in Cash Card Business.
III. Dynamic advertisement and print advertisement respectively cover the following:
A. Dynamic advertisement:
1. Dynamic imaging: Television, computer, Internet, and electronic video (dynamic images or films played on ATM, outdoor, or at bus or train station, mass rapid transit terminal or airport).
2. Sound advertisement: Radio, telephone, and electronic voice.
B. Print advertisement:
1. Static imaging:
(1) Slides.
(2) Static images or films played on computer, Internet or ATM.
(3) Static light box or signboard placed outdoor, at bus or train station, mass rapid transit terminal or airport.
2. Paper advertisement: Advertisements in newspaper, magazine, flyer (including tissue paper pack), poster, signboard, placard (including back board at temporary booth), fax, and advertisement mail.
IV. If an advertisement is on a number of credit products, indicate the annual percentage rate for each product. For example, in an advertisement on a composite loan that offers both "Installment loan" and "revolving credit", the advertisement should disclose the annual percentage rate for both "Installment loan" and "revolving line of credit" as described in Section II herein.
V. If the same credit product charges different interest rates or different fees for different segments of customers, or offers consumers different repayment options, indicate the interest rate, total fees, and annual percentage rate for each segment or each option.
VI. When disclosing annual percentage rate in the advertisement on installment loan, add the following statements:
A. The annual percentage rate disclosed in this advertisement is calculated based on the standard calculation examples on record with the competent authority. The actual terms and conditions of the loan will depend on the product offered by the bank. The annual percentage rate for each customer may vary, depending on the loan product and terms and conditions of the loan.
B. The annual percentage rate of total finance charges does not equate the interest rate for the loan.
For Installment loans, the statement in item B in the preceding paragraph needs not be provided if there are no charges (e.g. account management fees and credit insurance fees) other than interest.
VII. Produce examples as attached (not included) based on the trial calculation basis and principle of disclosure for advertising specimens specified above. |