71Comparison rate

#### 71 Comparison rate (1) This regulation applies if: (a) a credit provider, before entering into a credit contract, informs the debtor of the comparison rate in accordance with subsection 16(3) of the Code; or (b) a person publishes, or causes to be published, an advertisement that states or implies that credit is available and includes in the advertisement the comparison rate in accordance with Part 10 of the Code. (2) The comparison rate must be calculated as a nominal rate per annum, together with the compounding frequency, in accordance with this regulation. (3) The comparison rate is calculated using the formula:  where: > n is the number of repayments per annum to be made under the credit contract (annualised if the term of the contract is less than 12 months), except that: (a) if repayments are to be made weekly, n is 52.18; and (b) if repayments are to be made fortnightly, n is 26.09; and (c) if the contract does not provide for a constant interval between repayments, n is to be derived from the interval selected for the purposes of the definition of j. > r is the solution of:  where: > Aj is the amount of credit to be provided under the contract at time j (the value of j for the provision of the first amount of credit is taken to be zero). > Cj is the fee or charge (if any) payable by the debtor at time j in addition to the repayments Rj, being a credit fee or charge (other than a government fee, charge or duty) that is ascertainable when the comparison rate is disclosed (whether or not the credit fee or charge is payable if the credit is not provided). > j is the time, measured as a multiple (not necessarily integral) of the interval between contractual repayments that will have elapsed since the first amount of credit is provided under the credit contract, except that if the contract does not provide for a constant interval between repayments an interval of any kind is to be selected by the credit provider as the unit of time. > Rj is the repayment to be made at time j. > t is the time, measured as a multiple of the interval between contractual repayments (or other interval so selected) that will elapse between the time when the first amount of credit is provided and the time when the last repayment is to be made under the contract. (4) The comparison rate must be correct to at least the nearest one hundredth of 1% per annum. (5) In the application of the above formulae, reasonable approximations may be made if it would be impractical or unreasonably onerous to make a precise calculation. > Note: Example: If repayments are to be made on a fixed day each month, it may be assumed that repayments will be made on that day each month even though the credit contract provides for payment on the preceding or succeeding business day when the due date is not a business day. (6) The tolerances and assumptions under sections 180 to 182 of the Code apply to the calculation of the comparison rate. (7) The comparison rate must be accompanied by a statement of the amount of credit on which it is based and the term for which credit is provided. (8) In the case of a comparison rate under subsection 16(3) of the Code: (a) the amount of credit is to be the amount (or the maximum amount) required by the debtor; and (b) the term for which credit is provided is to be the term (or the maximum term) required by the debtor; and (c) the amount of credit, in the case of a continuing credit contract, is not to exceed the credit limit required by the debtor. (9) If the debtor does not make a requirement in relation to a matter mentioned in paragraph (8)(a), (b) or (c), the credit provider may determine the matter. (10) In the case of a comparison rate under Part 10 of the Code: (a) the amount of credit and term are to be typical of the type of credit contract offered in the advertisement; and (b) a number of comparison rates may be included in the advertisement for different credit contracts if the amount of credit and term applicable to each of the rates are clearly stated. (11) At the time that the debtor is informed of the comparison rate under subsection 16(3) of the Code, the debtor must be given the following warning by the credit provider in writing: ‘WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.’ (12) An advertisement that contains a comparison rate in accordance with Part 10 of the Code must include a warning that the comparison rate is accurate only for the example given. (13) A warning under this regulation must be given immediately after the comparison rate is given. > Note 1: Subsection 16(3) of the Code provides that the credit provider may inform the debtor of the comparison rate before entering into the contract. > Note 2: Part 10 of the Code provides that a person who publishes an advertisement about the availability of credit may include in the advertisement the comparison rate. If the credit provider or person does so, the comparison rate must be calculated as prescribed by the regulations and be accompanied by the warnings set out in the regulations.