The Financial Conduct Authority (FCA) is reviewing whether Annual Percentage Rates (APRs) help consumers understand borrowing costs and is seeking views on whether it should change how these are communicated in credit advertising.
APRs indicate the yearly cost of borrowing, including interest and fees. A representative APR means at least half of consumers receive that rate or better. Current rules require representative APRs in most credit advertising.
Research, published today, shows APRs are useful for comparing products, but additional information like total repayment figures can also help consumer understanding. But providing different information tailored to different products can sometimes make comparison harder and confusing.
The research showed that, among those shown APR alone, 80% of people correctly identified the cheapest product when the lower APR meant a lower repayment. Fewer than 1 in 5 did so when the lower APR didn’t mean cheaper borrowing.
Proposals to simplify parts of the Consumer Credit rule book on credit advertising have also been published. These aim to remove duplication and outdated requirements where the Consumer Duty already sets clear expectations for firms to support consumer understanding.
Alison Walters, director of consumer finance at the FCA, said:
“Clear information advertising credit helps people shop around. But there’s evidence that APRs do not always allow people to understand the true cost of credit. To help people navigate their financial lives, we’re asking for views on whether there’s a better way.”
The Discussion Paper published today, alongside the Consultation Paper on stripping back overly prescriptive requirements, focuses on whether more flexible ways of presenting loan costs could help borrowers make better informed choices. The Discussion and Consultation Paper closes on 17 June 2026.
Paul Matthews, Senior Risk Director at leading independent banking and credit advisory firm Broadstone, commented:
“APRs have long been the cornerstone of credit advertising, but the regulator’s research reinforces a well-known challenge – they are not always a reliable proxy for the true cost of borrowing, particularly where product structures differ.
The FCA’s willingness to revisit how borrowing costs are communicated is therefore welcome, especially at a time when affordability will be critical to a well-functioning credit market. There is a strong case for complementing APRs with clearer, more tangible measures such as total repayment or pounds-and-pence cost, provided this is done in a consistent way that preserves comparability.
Consumers tend to focus on monthly repayments and overall cost, so aligning disclosures with these behaviours will be key to improving outcomes. Under the Consumer Duty, firms are already expected to ensure communications are understandable and support good outcomes, so any simplification of the rulebook should focus on reducing duplication while maintaining robust standards.
The priority should be a balanced approach that improves consumer understanding without introducing unnecessary complexity. Any move towards more flexible disclosures will need careful calibration to avoid inconsistent approaches across the market, which could ultimately undermine comparability.”
