The President charged the President's Advisory Council on Financial Literacy to eliminate "deceptive practices". Well, the calculation of the Annual Percentage Rate is an antiquated, mathematically-untrue method adopted when the Act was passed in 1968 as part of the Consumer Credit Protection Act. The then Under Secretary of the Treasury, Joseph Barr, told the Subcommitte hearing the proposed act that the Actuarial method was used in the financial industry and was confirmed by the U S Supreme Court in 1839. That is true. Then, there were no ubiquitous machines that had compounding ... necessary to determine the mathematically-true, Effective APR. The case to which he referred was about a debt owed and the calculation method was a minor, if not obfuscated, issue.
You tell me if the follwing is deceptive:
On a payday loan where a 14-day post dated check is given for the borrower to receive $100, the current mathematically-untrue method of calculating the APR is the Actuarial method, popularly called the Nominal (or simple interest) APR ... "used for comparison". The APR using that method is 391.071% ((15/100)*(365/14)). [Three decimal points are used becaused on this closed-end loan, the tolerance of accuracy is 1/8th of a percent (0.125%)].
The mathematically-true, Effective APR is 3723.661% (((15/100)+1)^(365/14))-1).
Therefore the mathematically-true APR is 26,660 1/8ths ((3723.661-391.071)/0.125) from the mathematically-untrue, Nominal APR. {The symbol "^", the caret, is use in spreadsheet to compound the statement immetiately following.
26,660 1/8ths is shockingly greater than 1 1/8th.
The law is easly made truthful by changing the method of calculating the APR in section 226.14 of the act from, "... multiplied ... by ...." to "... compounded ... for ...." where it appears 9 times.
A F "Bob" Blair Jr
of LA
@
Jul 06, 2008 06:47:53 AM
WARREN IS LAME
downey is wayyyy better thatn warren at everything we also smoke warren at sports
idk
of CA
@
Jun 03, 2008 21:27:02 PM
Sure Ernesto. That statistic came from the Charles Schwab company, which does regular surveys on consumers and money.
Kimberly Palmer
of
@
May 27, 2008 14:41:06 PM
Hello,
I am an AP Statistics student at Warren High School in Downey, CA. My class is doing a project and I have to survey a claim. I was reading this article and I found a claim written in the article very interesting. The claim was "In fact, 60 percent of teenage respondents cited learning about money management as a top priority."
I would really appreciate more information on this claim. Thank you for your time and thank you in advance for any information that could be sent to me.
Sincerely,
Ernesto Montoya
Ernesto Montoya
of CA
@
May 23, 2008 13:42:16 PM
Financial Literacy
At one time, it was easier for an unemployed student to get a credit card than for an employed, divorced woman. Why was that? I think that the lenders have been playing games with the young financial illiterates for a long time.
We have required subjects in High Schools ( English for one). However, we have been aware for decades that many graduates do not know how to ballance a check book.
I realize that parents have a responsibility, but does that responsibility end at the schoolhouse door? And, does the blame also reside with the Teacher's Unions?
One of my pet peeves has to do with savings. We have been told for ages that citizens in this country do not save enough. Yet, the politicians in Washington have worked to reduce or eliminate the Capital Gains taxes, while leaving small time investors to pay a good portion of their savings to the IRS.
Frank
of CA
@
May 15, 2008 18:23:09 PM
Credit card equals instant gratification
In our personal life and how we let politicians run our government -- we want it all but do not agree to be taxed or make payments that will cover the cost. We finish college and take an entry levle job, but we want all the furniture, decorating, appliances, conveniences and eating out that our families earned after 20 or 30 years of advancing and raisng their salary.
We need to spend in accordance to what we earn and our government limited to what we pay in taxes. If we want more governemnt we have to be prepared to pay more taxes. And somehow, a credit card should only have a limit so the person charges say only 10 or 15 percent over what they pay off each month. And if the interest makes it more, no more credit until it is paid down. And the initial credit limit should be in the hundreds not the thousands.
Not everyone will earn enough to buy a house and pay heat and maintenance. If they do not, no mortgage.
A F "Bob" Blair Jr of LA @ Jul 06, 2008 06:47:53 AM
idk of CA @ Jun 03, 2008 21:27:02 PM
Kimberly Palmer of @ May 27, 2008 14:41:06 PM
Ernesto Montoya of CA @ May 23, 2008 13:42:16 PM
Frank of CA @ May 15, 2008 18:23:09 PM
A Kiner of NY @ May 15, 2008 17:31:10 PM
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