I handed Kraninger a calculator and asked her to calculate the APR on a payday loan. She couldn’t. And she’s supposed to be the top government official protecting consumers from predatory lending practices?
2:05
1M views
2,626
21.4K
50.7K
Conversation
This Tweet was deleted by the Tweet author. Learn more
You forgot the $20 one-time origination fee. Add 10%.
270%
3
11
218
The $20 origination fee is included in the definition of Finance Charge, so the interest of $20 plus the fee of $20 makes $40 cost to borrow $200 for 14 days. Answer . . . 520%! Truth in Lending Law requires APR to include fees, which
director did not know.🙁
Incorrect. Origination fee (OF) is *onetime* charge. Consider the IRR; OF recorded in Cash-flow Period 1 (CF1) only, not all 26.
Note, b/c this is a start-of-period loan, the borrower never had use of full $200—only $160. Could argument Interest (r) actually higher.
8
4
51
Think we have a definitional (legal vs finance) difference in how the interest is annualized. APR in this case is conceptual; $ not *actually* borrowed otherwise, you’re almost right. In your calc, borrower never receives full principal so APR
would be even higher.
Love finance.
1
calculation seems to be correct as per the Truth in Lending Act. Here is a formula from investopedia.com that I think calculates APR as required by the act.
4
7
29
Keep it up! You are amazing - unqualified people should not have these important positions!
1
3
