The Truth, But Not Always the Whole Truth, in Lending Laws

Both microcredit and sub-prime loans are loans to poor consumers, often in small amounts leading to high interest rates. These high interest rates charged by banks have raised the question whether the poor, often illiterate or with limited literacy, understand the amount of interests they are going to pay. For this many countries have enacted truth in lending laws.The paper surveys them in a number of developed and developing countries. It finds that the whole truth, the Effective Annual rate based on the actuarial method, is never revealed on the plea that it would be too complicated. There remain excluded areas which seem to be uncovered and approximations which could amount to white lies. But the degree of truth is evolving in each country in order to move to greater truth, while penalties for not complying with the truth standards are different and consequently not always incentive to banks