SECRETARIAT OF THE INTERMINISTERIAL COMMITTEE FOR CREDIT AND SAVINGS

Mod. 211

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The Minister of the Treasury, Budget and Economic Programming President of the Interministerial Committee for Credit and Savings

LL

SEEING Article 1 of Legislative Decree 25 February 2000, No. 63, pursuant to which the Interministerial Committee for Credit and Savings (CICR) shall adapt national legislation to Directive 98/7/EC of the European Parliament and of the Council of 16 February 1998 amending Directive 87/102/EEC on the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit, with particular regard to the indication of the annual percentage rate of charge (APRC) by means of a typical example;

SEEING Article 2 of Legislative Decree 63/2000, pursuant to which the CICR, within thirty days from the date of entry into force of the said decree, shall make the necessary amendments to the rules set out in the Decree of the Minister of the Treasury - President of the CICR of 8 July 1992, published in the Official Gazette of the Italian Republic of 20 July 1992, No. 169 (DM 8 July 1992), pursuant to Articles 122(2) and 123(2) of Legislative Decree 1 September 1993, No. 385 (Banking Act);

SEEING the aforementioned Articles 122(2) and 123(2) of the Banking Act, pursuant to which the CICR establishes the methods for calculating the APRC, identifying in particular the elements to be included and the calculation formula as well as the cases in which, for justified technical reasons, the APRC may be indicated by means of a typical example;

CONSIDERING that the aforementioned Directive 98/7/EC requires the use of a single method for calculating the APRC throughout the European Union in order to promote the establishment and functioning of the internal market and to ensure a high level of consumer protection;

CONSIDERING further that, pursuant to Article 3 of the aforementioned Directive 87/102/EEC, as amended by Article 1(d) of Directive 98/7/EC, and Article 123(2) of Legislative Decree 365/1993, a typical example may be used for the indication of the APRC only if it is not possible to use other methods;

RECOGNIZING the appropriateness that, when the medium used for the credit offer permits it, operators, in addition to indicating the APRC, also provide the consumer with a typical example;

ON PROPOSAL submitted by the Bank of Italy, after consulting the Italian Foreign Exchange Office;

DEEMING it urgent to act pursuant to Article 3(2) of the Banking Act.

DECREES

1. Letter (a) of Article 2(7) of the DM of 8 July 1992, cited in the preamble, is replaced by the following:

“(a) time intervals must be expressed in years or fractions of a year. A year consists of 365 days, 365.25 days or (for leap years) 366 days, 52 weeks or 12 identical months, each of which consists of 30.41666 days. The indication of the APRC must be accompanied by that of the specific time parameter used.”

2. In Annex 1 to the DM of 8 July 1992, the following are added to the Observations contained therein:

“- the result of the calculation must be expressed with an approximation up to the second decimal place. For rounding, the following rule applies: if the third decimal digit is greater than or equal to 5, the second decimal digit is increased by one unit;

• the formulas used must yield a result equal to that of the examples contained in Annex 3”.

3. After Annex 2 to the DM of 8 July 1992, the Annex to the present decree, containing examples of APRC calculation, is inserted.

4. This decree, which will be published in the Official Gazette of the Italian Republic, enters into force on the sixtieth day following its publication.

Rome, 6 MAY 2000

THE MINISTER
Vincenzo Visco

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Annex

ANNEX 3

APRC CALCULATION EXAMPLES

A. CALCULATION BASED ON THE CALENDAR

[1 YEAR = 365 DAYS (OR 366 FOR LEAP YEARS)]

First example

The credit is S = 1000 euros on 1 January 2001.

It is repaid with a single installment of 1200 euros paid on 1 July 2002, i.e., 1 year and ½ or 546 days (365+181) after the loan date.

The equation becomes:
1000 = 1200 / (1+i)^(546/365)

i.e.:
(1+i)^(546/365) = 1.2
1+i = 1.1296204 i = 0.1296204

This amount is rounded to 12.96%.

Second example

The credit is S = 1000 euros, but the lender deducts 50 euros for credit file processing expenses; the repayment of 1200 euros, as in the first example, is made on 1 July 2002.

The equation becomes:
950 = 1200 / (1+i)^(546/365)

i.e.:
(1+i)^(546/365) = 1.263157

Third example

The credit is 1000 euros on 1 January 2001, repayable in two installments of 600 euros each, paid respectively after 1 and 2 years.

The equation becomes:
1000 = 600 / (1+i) + 600 / (1+i)^(730/365) = 600 / (1+i) + 600 / (1+i)²

It is solvable algebraically and yields i = 0.1306623, rounded to 13.07%.

Fourth example

The credit is S = 1000 euros on 1 January 2001 and the repayment installments are:

• After 3 months (0.25 years or 90 days): 272 euros
• After 6 months (0.5 years or 181 days): 272 euros
• After 12 months (1 year or 365 days): 544 euros
• Total: 1088 euros

The equation becomes:
1000 = 272 / (1+i)^(90/365) + 272 / (1+i)^(181/365) + 544 / (1+i)^(365/365)

The equation allows calculating i with successive approximations.
The result is i = 0.13226 rounded to 13.23%.

B. CALCULATION BASED ON A STANDARD YEAR

(1 YEAR = 365 DAYS OR 365.25 DAYS, 52 WEEKS OR 12 EQUAL MONTHS)

First example

The credit is S = 1000 euros.

It is repaid with a single installment of 1200 euros paid 1 year and ½ after the loan date (i.e., 1.5 × 365 days = 547.5 days or 1.5 × 365.25 = 547.875 days or 1.5 × 366 = 549 days or 1.5 × 12 = 18 months or 1.5 × 52 = 78 weeks).

The equation becomes:
1000 = 1200 / (1+i)^(547.5/365) = 1200 / (1+i)^(547.875/365.25) = 1200 / (1+i)^(18/12) = 1200 / (1+i)^(78/52)

i.e.:
(1+i)^1.5 = 1.2
1+i = 1.129243 i = 0.129243

This amount is rounded to 12.92%.

Second example

The credit is S = 1000 euros, but the lender deducts 50 euros for credit file processing expenses; the repayment of 1200 euros, as in the first example, is made 1 year and ½ after the loan date.

The equation becomes:
950 = 1200 / (1+i)^(547.5/365) = 1200 / (1+i)^(547.875/365.25) = 1200 / (1+i)^(18/12) = 1200 / (1+i)^(78/52)

i.e.:
(1+i)^1.5 = 1200 / 950 = 1.263157
1+i = 1.168526 i = 0.168526

This amount is rounded to 16.85%.

Third example

The credit is 1000 euros on 1 January 2001, repayable in two installments of 600 euros each, paid respectively after 1 and 2 years.

The equation becomes:
1000 = 600 / (1+i)^(365/365) + 600 / (1+i)^(730/365) = 600 / (1+i)^(365.25/365.25) + 600 / (1+i)^(730.5/365.25) = 600 / (1+i)^(12/12) + 600 / (1+i)^(24/12) = 600 / (1+i)^(52/52) + 600 / (1+i)^(104/52) = 600 / (1+i)¹ + 600 / (1+i)²

It is solvable algebraically and yields i = 0.13066, rounded to 13.07%.

Fourth example

The credit is S = 1000 euros and the repayment installments are:

• After 3 months (0.25 years or 13 weeks or 91.25 days or 91.3125 days): 272 euros
• After 6 months (0.5 years or 26 weeks or 182.5 days or 182.625 days): 272 euros
• After 12 months (1 year or 52 weeks or 365 days or 365.25 days): 544 euros
• Total: 1088 euros

The equation becomes:
1000 = 272 / (1+i)^(91.25/365) + 272 / (1+i)^(182.5/365) + 544 / (1+i)^(365/365) = 272 / (1+i)^(91.25/365.25) + 272 / (1+i)^(182.625/365.25) + 544 / (1+i)^(365.25/365.25) = 272 / (1+i)^(3/12) + 272 / (1+i)^(6/12) + 544 / (1+i)^(12/12) = 272 / (1+i)^(13/52) + 272 / (1+i)^(26/52) + 544 / (1+i)^(52/52) = 272 / (1+i)^0.25 + 272 / (1+i)^0.5 + 544 / (1+i)^1

The equation allows calculating i with successive approximations.
The result is i = 0.13185 rounded to 13.19%.