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I CCA'd Egg and the agreement I got back had the following clause
We will charge interest -
4.1
On Purchases and transferred balances put on the account until 1 August 2003 at a monthly rate of 1.093% 12.3% APR and otherwise at a monthly rate of 1.093% 13.9% APR.
How can the monthly rate be the same but the APR be different?
I asked this question of Egg and got the following response -
"The annual interest rate is an average. As some months are longer than others, the 13.9% rate shown in your original agreement would be what is charged over the year. Even so, if calculated roughly, 1.093% over 12 months is 13.1 not 12.3. This was a rough equation and a mentioned previously 13.9 is the total amount over a year."
Wonderful nonsense!! But do not forget that most of their customers will be satisfied with this
This is typical of Egg. The problem is that the lower echelons are not properly trained. The top men who do the training are equally ignorant !
1.093% monthly is an actual rate (the rate charged) -of 13.9337...% annually.This is allowed to be shown as 13.9% APR. A good example of the APR [problem]. They will tell you next that the rate charged IS the APR. So they will be saying that 13.9337 is equal to 13.9 which is mathematical nonsense.
12.3% is never correct and I cannot see a way to get this figure. I think that the 13.1% is got frrom the 'rough equation' :- Monthly rate *12=annual rate: 1.093*12=13.116 so 13.1% is roughly right but the equation is of course incorrect.
The poor guy who wrote to you is trying to make sense out of nonsense.
Is this important to you? If so perhaps you coud post more
One of the things they might try is to start from 19.337% and do some complicated manoeuverings to 'prove' that 19.337 equals 19.3. Basically all they will be doing is subtracting .037 and the mathematics though on the surface plausible is a total charade. A magician's trick!
Thank you Pelham9, I just wanted someone to confirm I wasn't going mad. I was especially intrigued by the "some months are longer than others" comment??
I just wondered what the implications were of them issuing an agreement which states an interest rate of 12.3% when it is actually 13.9% bearing in mind the tolerance you advised previously. I believe our friend on the other thread also has the same boggle on his agreement in that the same monthly rate is quoted with two different APRs. I have queried it again with Egg so I will let you know what they say this time. They also told me they don't have my original agreement as the FSA doesn't require them to. I am not sure what relevence that has even if it is true and I'm not sure it is.
I think that a judge will expect them to produce the original agreement but who can predict judges. If the photocopy is good it might well be accepted.
Why do they not have the original? Obviously to save costs and improve profits by not having to file or store the original. If they have destroyed such an important document there should be a record of its destruction and copying.
just wondered what the implications were of them issuing an
agreement which states an interest rate of 12.3% when it is actually 13.9%
Egg do not state that the rate of interest they will charge is 12.3% - Egg state that the APR is 12.3% They DO state the interest rate is 1.093% monthly! This is a yearly rate of 13.9337.....% and an APR of 13.9%
Are you one of those people who believe that the APR is ' the rate of any interest to be charged' ? It is a belief that the banks have cultivated ever since APR was first defined and they have been very successful. If you were to ask 100 judges and lawyers if the APR was the interest rate to be charged 99 would say 'yes' and they would all be wrong.
This is a fine example of the APR [problem] and if you are interested post again.
You say that your friend has two different APRs for the same monthly rate. This is quite possible but you have to understaand the whole concept of APR to see how this could be. APR is not the annual rate that you will be charged.
Boggly Egg Interest rate calculation
and the agreement I got back had the following clause
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