No C 155/4 Official Journal of the European Communities 23. 6. 89 
II 
(Preparatory Acts) 
COMMISSION 
Amended proposal for a Council Directive amending Directive 87/102/EEC for the approxi­
mation of the laws, regulations and administrative provisions of the Member States concerning 
consumer credit (') 
COM(89) 271 final — SYN 132 
(Submitted by the Commission pursuant to Article 149 (3) of the EEC Treaty on 29 May 1989) 
(89/C 155/04) 
0) OJ No C 155, 14. 6. 1988, p. 10. 
ORIGINAL PROPOSAL AMENDED PROPOSAL 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European 
Economic Community, and in particular Article 100A 
thereof, 
Having regard to the proposal from the Commission, 
In cooperation with the European Parliament, 
Having regard to the opinion of the Economic and 
Social Committee, 
Whereas it is desirable, in order to promote the estab­
lishment and functioning of the internal market and to 
safeguard its consumers at a high level of protection, 
that, despite the differences in development of certain 
economies, one method of calculating the annual 
percentage rate of charge for credit should be used 
throughout the Community; 
Whereas Article 5 of Council Directive 87/102/EEC (') 
anticipates the introduction of a Community method of 
calculating the annual percentage rate of charge for 
credit; 
Whereas it is desirable, as a first step towards the estab­
lishing of such a method, that an appropriate math­
ematical formula be laid down for the purpose of calcu­
lating the annual percentage rate of charge; whereas it is 
useful to adopt common rules concerning such a 
formula, although the cost items which will have to be 
taken into account in calculating the annual percentage 
rate of charge remain to be determined, THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
unchanged 
unchanged 
unchanged 
unchanged 
unchanged 
unchanged 
deleted 
O OJ No L 42, 12. 2. 1987, p. 48. 
23. 6. 89 Official Journal of the European Communities No C 155/5 
ORIGINAL PROPOSAL AMENDED PROPOSAL 
HAS ADOPTED THIS DIRECTIVE: 
Article 1 
Council Directive 87/102/EEC is hereby amended as 
follows: HAS ADOPTED THIS DIRECTIVE: 
Article 1 
unchanged 
1. In Article 1 (2) (e), the definition of 'annual 
percentage rate of charge' is replaced by the 
following: 
'(e) "annual percentage rate of charge" means the 
total cost of the credit to the consumer, 
expressed as an annual percentage of the amount 
of the credit granted and calculated in 
accordance with Article la of this Directive.' 
2. The following Article la is inserted: 2. The following Article la is inserted: 
Article la Article la 
1. For the purpose of stating the annual percentage 
rate of charge for credit, the rate which equalizes the 
present values of the prospective or actual 
commitments of the lender and borrower shall be 
calculated in accordance with the method set out in 
Annex II. 1. (a) The annual percentage rate of charge, which is 
the rate which equalizes, on an annual basis, 
the present values of all commitments (loans, 
repayments and charges), existing or future, 
entered into by the creditor and the borrower, 
shall be calculated in accordance with the 
mathematical formulae set out in Annex II. 
(b) A simple illustration is given in Annex II. 
Further examples of calculations are given in 
Annex III. 
2. The annual percentage rate of charge shall be 
calculated at the time of concluding an agreement for 
credit. (a) For the purpose of calculating the annual 
percentage rate of charge, the total cost of the 
credit to the consumer shall be ascertained by 
including every item of cost which the 
consumer must pay as a condition of obtaining 
the credit, including interest and all other 
charges. 
(b) For the purpose aforesaid the following items 
shall not form part of the total cost of the 
credit to the consumer: 
(i) charges payable by the consumer if he 
fails to comply with his obligation under 
the credit agreement; 
(ii) charges which, in a transaction of 
purchase of goods or services, the 
consumer is obliged to pay irrespective of 
whether he purchases for cash or by 
means of the credit; 
No C 155/6 Official Journal of the European Communities 23. 6. 89 
ORIGINAL PROPOSAL AMENDED PROPOSAL 
(iii) charges payable by the consumer for the 
transmission of money in reimbursement 
of the credit and in payment of the 
interest and other charges, if the creditor 
imposes upon the consumer special and 
onerous requirements in this respect. 
However, if the creditor is obliged to pay 
charges for receiving the consumer's 
payments relating to the credit, these 
charges shall be included in the total cost 
of the credit to the consumer if the 
creditor recoups them from the consumer; 
(iv) charges payable by the consumer for or 
related to services or benefits which are 
both incidental to the credit agreement 
and payable pursuant to an obligation 
existing before the consumer entered into 
the credit agreement (such as a 
subscription for membership of a club, 
association or cooperative); 
(v) premiums for insurances or guarantees 
which do not have the objective of 
ensuring or securing payment to the 
creditor in the event of the death, sickness 
or unemployment of the consumer, of a 
sum equal in amount to that of the credit, 
with interest and other charges, or to 
parts thereof; 
(vi) premiums for insurances or guarantees 
which, although their purpose is to ensure 
or to secure such payment, are never­
theless not paid pursuant to an obligation 
imposed upon the consumer by the 
creditor and accordingly cannot be 
regarded as being payable "as a condition 
of obtaining the credit"; 
(vii) premiums for the insurance of motor 
vehicles, unless the cover exceeds the 
statutory requirement of insurance for 
damage to third parties and the increased 
insurance is contracted by the consumer 
pursuant to an obligation imposed by the 
creditor and must accordingly be 
regarded as being payable "as a condition 
of obtaining the credit". 
3. (a) The annual percentage rate of charge shall be 
calculated as at the time of concluding the 
credit agreement; but this rule is without 
prejudice to the provisions of Article 3 relating 
to advertisements and offers. 
23. 6. 89 Official Journal of the European Communities No C 155/7 
ORIGINAL PROPOSAL AMENDED PROPOSAL 
(b) The calculation shall be made on the 
assumption that the credit agreement runs for 
its agreed period and that the creditor and the 
consumer perform their obligations thereunder 
in the manner and at the time or times agreed. 
4. Where a credit agreement contains terms 
whereunder the rate of interest and the amount or 
rate of the other items of cost can be varied, the 
annual percentage rate of charge shall be calculated 
on the basis that the relevant rate or amount remains 
fixed at that applicable at the time of conclusion of 
the credit agreement. 
5. Where the amount of an item or items of cost 
affecting the calculation of the annual percentage rate 
of charge has not been specified beyond doubt in the 
credit agreement, the annual percentage rate of 
charge shall be calculated on the basis of the 
following assumptions: 
— if no credit limit is stated in the credit agreement, 
that the amount of credit granted is equal to an 
amount fixed by the relevant Member State, not 
exceeding the equivalent of ECU 2 000; 
— if the credit agreement contains no fixed timetable 
for the making of payments by the consumer in 
reimbursement of the credit, with interest and 
other charges, that the duration of the credit 
agreement is one year; 
— unless otherwise specified, that the amount of the 
credit will be made available and that the 
payments in reimbursement of the credit, with 
interest and other charges, will be made at the 
earliest moment provided for in the credit 
agreement. 
3. The use in a Member State of a method of 
calculation other than that shown in Annex II shall be 
allowed only if the resulting annual percentage rate of 
charge does not diverge by more than one tenth of 
one per cent from the rate of charge yielded by the 
method shown in the said Annex. 6. The use in a Member State of a method of 
calculation other than that shown in Annex II shall be 
allowed only if the resulting annual percentage rate of 
charge does not diverge by more than one tenth of 
one percentage point from the rate of charge yielded 
by the method shown in that Annex.' 
4. In the case of credit on current account, the 
method of calculation shown in Annex II shall be 
applied on the basis of the assumptions set out in 
Annex III.' deleted 
3. The following subparagraphs (c) (d) and (e) are 
inserted in Article 4 (2): 
No C 155/8 Official Journal of the European Communities 23. 6. 89 
ORIGINAL PROPOSAL AMENDED PROPOSAL 
'(c) a statement of the amount in money, and the 
number and periodicity of the payments to be 
made by the consumer in reimbursement of the 
credit and in payment of the interest and other 
charges; and a statement of the total of those 
money amounts; 
(d) a statement of the items of cost which have not 
been included in calculating the annual 
percentage rate of charge but which the 
consumer may nevertheless in certain circum­
stances have to pay for or in connection with the 
credit; and also a statement specifying those 
circumstances. Where the true amounts of these 
items, in money, are known they shall be stated; 
otherwise they shall be stated as estimates made 
as realistically as possible; 
(e) a statement of the relevant conditions in cases 
where the credit is granted subject to conditions 
which are not specifically referable to the credit 
nature of the agreement, such as for example: 
— that the consumer must conclude a certain 
insurance or certain insurances, or 
— that the consumer must achieve certain 
savings which are to be placed on a particular 
account, or 
— that the consumer must be or become of a 
certain club, association or cooperative.' 
3. Article 5 of the said Directive is repealed. deleted 
4. The Annex becomes Annex I. Annexes II and III in 
the Annex to this Directive are added. 4. The Annex becomes Annex 1; and Annexes II and III 
contained in the Annex to this Directive are added. 
Article 2 
1. Member States shall take the necessary measures to 
comply with this Directive not later than 31 December 
1992 and shall forthwith inform the Commission thereof. 
Member States shall communicate to the Commission 
the texts of the main provisions of national law which 
they adopt in the field covered by this Directive. Article 2 
unchanged 
2. The provisions adopted pursuant to the first 
subparagraph shall make express reference to this 
Directive. 
Article 3 
This Directive is addressed to the Member States. Article 3 
unchanged 
23. 6. 89 Official Journal of the European Communities No C 155/9 
ANNEX 
'Annex II 
The basic equation 
The general formula A simple illustration 
The lender advances a sum S. S = ECU 1 000 
Borrower repays in n payments, numbered 1, 2, 3 ... tk ... n. Two repayments: 1 and 2 
(n = 2) 
of ECU 600 each. 
These payments are not necessarily of equal amount, nor are 
the intervals between them necessarily of equal length. The 
dates to be considered are the date of the loan and the dates of 
the repayments. The payments are of equal amount. 
Payment k is made tk years after the date of the loan (tk being 
not necessarily a full number). The payments are made at equal intervals, after one and two 
years, respectively 
tf = 1 and t, = 2. 
The effective annual rate is i. The effective annual rate is i. 
The equation which equalizes the present values of the loan and 
repayments by the borrower is as follows: The equation then appears as follows: 
s = 2 
k = I O+ift 600 600 1 000 = + -2 (1 + i) (1+i)2 
This enables i to be calculated provided that the amount of each 
payment A/, is known ('). The loan = the present value of the first payment plus the 
present value of the second payment. 
This is a quadratic equation with i, which can be solved by 
algebra: 
i = 0,1306623 . . . 
This can be rounded off to i = 13,1 or 13,07 % depending on 
whether the State, or usage permits a margin of tolerance of 
one or two decimal points. 
Inversely, the amount of a repayment can be calculated in this 
way if one knows the amounts and dates of other repayments, 
and the effective annual rate i. If the payment at the end of the first year was reduced from 
ECU 600 to ECU 500, and if i was rounded off to 13,1 %, 
payment at the end of the second year would be ECU 713,66 
(linear equation). 
(') The amendments to the original proposal are in italics. 
No C 155/10 Official Journal of the European Communities 23. 6. 89 
ANNEX III 
ORIGINAL PROPOSAL AMENDED PROPOSAL 
Adaptation of the method of calculation shown in Annex I to the 
case of running account credit Further examples of Calculations 
"Where the annual percentage rate of charge is to be indicated in 
relation to an agreement for credit on a current account, the 
following assumptions shall be made: 
(a) the rate of interest does not change; 
(b) (i) if there is no fixed timetable for payment, the duration 
of the credit is one year; 
(ii) if there is a fixed timetable for payment, it is observed 
by the borrower; 
(c) (i) if the agreement specifies a credit limit, the credit 
granted is equal to that limit; 
(ii) if no credit limit is stated in the agreement, the credit 
granted is equal to the amount fixed by the relevant 
Member State, not exceeding ECU 200; 
(d) unless otherwise specified, the credit is made available and 
the payments are made at the earliest moment provided for 
in the agreement. First example 
Sum loaned S = ECU 1 000. 
It is repaid in a single payment of ECU 1 200 made 18 months, 
i.e. 1,5 years, after the date of the loan. 
1 200 
(l+i)1.5 The equation becomes 1 000 = 
or (1+i)1-5 = 1,2 
1 + i = 1,129243 
i - 0,129243 
This amount will be rounded off to 12,9 % or 12,92 % 
depending on whether the State or usage permits a margin of 
tolerance of one or two decimal points. 
Second example 
The sum agreed is S = ECU 1 000 but the creditor retains 
ECU 50 for enquiry and administrative expenses, so that the 
loan is in fact ECU 950; the repayment of ECU 1 200, as in the 
first example, is made 18 months after the date of the loan. 
The equation becomes 950 = 1 200 
(1+i)1-5 
or (1 + i)i.5 = 
1 + i 1200 = 1,263157 950 
1,16851 
0,16851 rounded off to 16,9 or 16,85 % 
depending on whether the State or usage 
permits a margin of tolerance of one or two 
decimal points. 
Third example 
The sum lent is ECU 1 000 and the amounts to be paid by the 
borrower are: 
After three months (0,25 years): 
After six months (0,50 years): 
After 12 months (1 year): 
Total: 
The equation becomes: 
272 1 000 = + 272 
(1+i)0'25 (1+i) 272 ECU 
272 ECU 
544 ECU 
1 088 ECU. 
544 
1 + i 
This equation allows i to be calculated by successive approxi­
mations, which can be programmed on a pocket computer. 
The result is: i = 0,1321 rounded off to 13,2 or 13,21 %, 
depending on whether the State or usage 
permits a margin of tolerance of one or 
two decimal points.'