FCA Reviewing Whether APRs Support Consumers’ Choices

WHY THIS MATTERS: This move from the Financial Conduct Authority (FCA) is far more than a technical consultation on a disclosure rule; it signifies the true test of the UK’s Consumer Duty framework. Annual Percentage Rates (APRs) were designed for a simpler credit market, and the research confirms they often fail to communicate the actual, pounds-and-pence cost of borrowing in the era of diverse, tech-enabled products like Buy Now Pay Later (BNPL) and complex personal loans. The core significance for the industry is the regulatory pivot towards prioritizing practical consumer understanding over rigid compliance. By proposing more flexible, outcomes-focused disclosures, the FCA is challenging lenders—especially fintechs building new credit models—to prove their commitment to responsible lending. Firms that can successfully innovate beyond the limitations of the representative APR to provide clarity, potentially through open finance data or clearer total repayment figures, stand to gain a vital edge in trust and market integrity.

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 These aim to remove duplication and outdated requirements where the Consumer Duty already sets clear expectations for firms to support consumer understanding.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. 

FF NEWS TAKE: The push for greater flexibility in credit disclosure is a major catalyst. This debate moves the needle by officially acknowledging that the one-size-fits-all APR is a legacy metric ill-suited for modern, diverse credit products. The next focal point will be whether firms can move from mandatory boilerplate to genuine, tech-driven transparency. We must watch for how fintech lenders use their agility—perhaps through Open Finance insights—to present simple, total repayment costs without creating an unmanageable comparison minefield for consumers.