TECHNICAL NOTE Developing a Key Facts Statement for Consumer Credit MAY 2018 Finance, Competitiveness & Innovation Global Practice © 2018 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. RIGHTS AND PERMISSIONS The material in this work is subject to copyright. 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CONTENTS Acknowledgments iii Abbreviations iv EXECUTIVE SUMMARY 1 1 OBJECTIVES OF A KEY FACTS STATEMENT FOR CONSUMER CREDIT 3 2 CONTENT OF KEY FACTS STATEMENTS 4 2.1 Total Cost 4 2.2 Fees and Charges 6 2.3 Terms and Conditions 9 2.4 Messages and Warnings 10 3 DESIGN OF KEY FACTS STATEMENTS 11 3.1 Design Elements 11 3.2 Language Elements 11 3.3 Format 13 4 ORAL COMMUNICATION AND STAFF TRAINING 15 5 TIMING AND MANNER OF PROVISION 16 6 SCOPE OF APPLICATION 17 7 DIGITAL CREDIT AND DIGITAL DISCLOSURE 17 8 LEGAL MANDATE, SUPERVISION, AND ENFORCEMENT 19 9 CONSUMER TESTING, WORKING WITH INDUSTRY, AND 19 RAISING CONSUMER AWARENESS ANNEX A ILLUSTRATIVE KEY FACTS STATEMENT FOR CONSUMER CREDIT 22 ANNEX B COUNTRY EXAMPLES OF KEY FACTS STATEMENTS 24 REFERENCES 35   i ii   Technical Note on Developing a Key Facts Statement for Consumer Credit BOX AND FIGURES Box 1 Definition of Total Cost of Credit from EU Consumer Credit Directive 5 Figure 1 Illustrative Key Facts Statement for Consumer Credit 6 Figure 2 Illustrative Key Facts Statement for Consumer Credit 7 Figure 3 Illustrative Key Facts Statement for Consumer Credit 8 Figure 4 Pre-Agreement Truth in Lending Disclosure Statement in Ghana 9 Figure 5 Product Disclosure Sheet for Personal Loans in Malaysia 10 Figure 6 Pre-Agreement Statement and Quotation for Small Credit Agreements in South Africa 12 Figure 7 Graphic Showing APR in Relation to APRs on Similar Loans 13 Figure 8 Pre-Agreement Truth in Lending Disclosure Statement in Ghana 14 ACKNOWLEDGMENTS This technical note is a product of the Financial Inclusion, Infrastructure & Access team in the World Bank Group’s Finance, Competitiveness & Innovation Global Practice. This technical note was drafted by Jennifer Chien (Senior Financial Sector Specialist) and is based partly on previous tech- nical assistance provided by Ms. Chien during World Bank Group country-level projects. The author is grateful to the peer reviewers Gian Boeddu (World Bank Group) and Ivo Jenik (Consultative Group to Assist the Poor) for their valuable comments. Mahesh Uttamchandani (Practice Manager, Finance, Competitiveness & Innovation) and Douglas Pearce (Practice Man- ager, Finance, Competitiveness & Innovation) provided overall guidance. The author also grate- fully acknowledges design and layout assistance provided by Naylor Design, Inc., and editorial inputs provided by Charles Hagner.   iii ABBREVIATIONS APR annual percentage rate BSP Bangko Sentral ng Pilipinas KFS key facts statement MFI microfinance institution NBFI non-bank financial institution SEC Securities and Exchange Commission (of the Philippines) USD United States dollar USSD unstructured supplementary service data iv EXECUTIVE SUMMARY The purpose of this technical note is to provide practical A comprehensive regulatory framework for disclosure and guidance to policy makers seeking to develop key facts transparency includes multiple components. For example, statements (KFSs) and related disclosure requirements disclosure rules should ensure fair advertising and market- for consumer credit products. The technical note shares ing that is not misleading. There should be basic rules for key principles, international good practices, and lessons providing consumers with loan agreements that describe learned for developing effective KFSs and precontrac- all terms and conditions. After purchasing a financial tual disclosure requirements. A basic KFS for consumer product or service, consumers should also receive ongo- credit is included in annex A for illustrative purposes ing statements and notifications of changes in rates, only. Examples of KFSs from Ghana, Malaysia, the Philip- terms, and conditions. Efforts to increase financial literacy pines, South Africa, and the United Kingdom are also and financial capability are also important to complement included in annex B.1 disclosure regimes. Disclosure and transparency are a cornerstone of financial KFSs for consumer credit products are one component of consumer protection. Aggressive, misleading advertising this broader disclosure framework and can help to and sales practices by financial service providers and low address transparency concerns by clearly conveying total levels of financial literacy can lead to poor choices by con- cost metrics, key fees and charges, and key terms and sumers. Information on relevant fees and charges and conditions. KFSs should prominently disclose the total terms and conditions may be incomplete. Conversely, cost of a loan, including interest and all up-front and information may be presented in a manner that is over- recurring fees and charges, using both percentages whelming and difficult to comprehend. As a result, con- (annual percentage rate, or APR) and monetary figures sumers may be unaware of the full costs they will incur for (total cost of credit) to allow for both comparison and a credit product or the terms and conditions that may comprehension of total cost. Standardized methods for affect them (such as variable interest rates or loss of collat- calculating total cost of credit and APR should be pro- eral). Without clear information provided during the vided in implementing regulations. The regular install- pre-transactional stage, consumers are unable to compar- ment amount for repayment should be displayed ison shop or make informed choices regarding what credit prominently. KFSs should also include standard, itemized product is best suited to their specific needs. Such a situ- fees and charges (such as documentation fees, account ation can harm consumer welfare and potentially lead to maintenance fees, and mandatory insurance fees) and over-indebtedness. key terms and conditions that are the most relevant or risky to consumers (such as variable interest rates, default 1.  Note that KFSs from these jurisdictions are not presented as interest rates, collateral requirements, the ability to pre- “best” practices per se, but to provide a range of practical pay without penalties, and recourse mechanisms). examples. Similarly, in this technical note references to country examples are for demonstrative purposes and are not exhaustive.   1 2   Technical Note on Developing a Key Facts Statement for Consumer Credit KFSs should follow a standardized format that is designed Appropriate adaptations will be required for digital credit to convey information in a simple and easy-to-understand and digital disclosure. The nature of digital credit transac- manner. KFSs should be brief, preferably one to two tions, which are often remote, occur at rapid speeds, and pages, and limited to critical information. Ideally, the most are conducted via small mobile screens, raises multiple important information should be presented in the top half risks for consumers. The core requirements regarding of the first page. KFSs should utilize boxes and tables, what content should be disclosed in KFSs should apply to bold font, plain language, legible font sizes, and graphics digital credit as well, such as requiring standardized calcu- to convey the most important information to consumers lation and presentation of APR and total cost of credit and clearly, in a format that attracts attention and is easy to disclosure of key terms and conditions. However, design understand. Insights from behavioral research have elements will need substantial adjustment to make KFSs helped to shed light on good practices for effective dis- appropriate for a mobile screen. Adapted approaches closure, such as presenting numerical information in rela- could include the use of standardized icons as shorthand tion to other relevant examples in order to provide context to convey key terms or concepts in an easily digestible and perspective.2 manner and layered messaging, where summary informa- tion is presented on an initial screen and more detailed Requirements for oral communication by provider staff information is available at a secondary level. In addition, should complement the KFS itself. The information con- an interactive process could be utilized that takes con- tained in a KFS must necessarily be limited, so as to not sumers through multiple screens on their mobile phone to overwhelm consumers. Provider staff should be required draw their attention to key terms and risks before they are to provide adequate oral explanations of information in able to proceed with obtaining a digital credit product. KFSs, particularly regarding material concepts and terms that require more detailed explanation (such as how and Policy makers will need to consider their legal mandate to when a borrower is reported to credit bureaus). issue requirements for KFSs and how they will be super- vised and enforced. Issuing KFS requirements may require When a KFS is provided is critical. Key information clarifying or expanding existing regulatory mandates. should be provided early in the shopping and pre-trans- Supervisory practices will also need to be adapted to actional stages in order to ensure that consumers can ensure strong and consistent supervision and monitoring utilize such information to comparison shop and suffi- of new requirements, and proportionate enforcement ciently evaluate a credit product before deciding which action should be taken in instances where non-compli- product to purchase. Providing a KFS only when a con- ance is identified. sumer enters the provider’s premises to sign an agree- ment is likely to be too late in the decision-making Consumer testing of KFSs is highly recommended. process to be useful. Designing a KFS effectively can be challenging. Finding the right balance between providing key information with- Implementation of a KFS requirement will involve deter- out overwhelming consumers is difficult. Effectively cap- mining its scope of application. Ideally, all providers of turing a consumer’s attention is also a challenge. What is similar consumer credit products should be required to effective will depend partly on country context. Consumer use the same form of KFS. Achieving this may require testing following an iterative process of testing and refin- coordination and harmonization across different govern- ing design elements of a KFS can be used to ensure that ment agencies. Policy makers will also need to consider the final KFS effectively conveys key information to con- for which types of consumer credit products KFS require- sumers and achieves the desired policy objectives. ments should apply, and what adaptations may be needed depending on the type of product (for example, install- Finally, policy makers should work with industry stakehold- ment loan, revolving loan, mortgage, credit card). This ers and consumer groups to implement KFSs. Working technical note focuses in particular on personal install- with industry stakeholders such as industry associations ment loans with a fixed term, as this is a common product can help to ensure familiarity and buy-in with a standard- used by mass consumers. ized KFS prior to its introduction in the market. Public- awareness campaigns should also be undertaken to ensure that consumers are aware of their rights to obtain 2.  See Hogarth and Merry, “Designing Disclosures.” a KFS and understand its content and format. Technical Note on Developing a Key Facts Statement for Consumer Credit   3  BJECTIVES OF A KEY FACTS 1. O ner that is easy to comprehend, and it is not provided consistently across providers. Excessive fine print makes STATEMENT FOR CONSUMER it more difficult for consumers to understand information CREDIT that is disclosed. Two primary objectives of disclosure are (1) increasing Due to the lack of properly disclosed information, misun- consumer comprehension and (2) increasing the ability to derstandings by consumers can be common. Borrowers comparison shop. Consumer comprehension allows con- are often surprised by unexpected fees and charges, such sumers to understand and choose appropriate products, as the costs for insurance or default interest rates. This lack while comparison shopping allows consumers to “vote of understanding prevents comparison shopping and with their feet” and leads to greater competition among hampers the ability of consumers to make informed providers, which may help to lower prices and improve choices when selecting products, and it may increase the the quality of products offered. A range of research has potential for over-indebtedness. These problems are shown the beneficial, real-world impact of disclosure on compounded by low levels of financial literacy (particu- consumer and market behavior.3 larly in developing countries, where consumers may be entering the formal financial sector for the first time), by a However, pricing and other terms and conditions of credit lack of responsible lending requirements such as suitabil- products can often be opaque or even deceptive, and ity tests, and by a high demand for credit. advertisements are frequently incomplete or misleading. Nominal annual or monthly interest rates may be used, Pricing and terms need to be clear and understandable so making it difficult to determine the total cost of a credit consumers can choose appropriate products for their product. Different providers may use different terminol- needs. Disclosure rules are intended to counteract infor- ogy for the same fees (for example, “application fee,” mation asymmetries in order to enable consumers to com- “processing fee,” “arrangement fee”), or aggregate fees prehend products, compare across providers, and select and charges into lump sums, adding to consumer confu- the product best suited for them. Effective disclosure also sion and diminishing the ability to compare products aims to combat irrational consumer behavior and behav- across providers. In addition, information on the potential ioral biases, such as the tendency of borrowers to focus risks of credit products, such as penalties or variable inter- more on the present item being financed, to discount the est rates, may not be disclosed clearly. Advertising and future costs of the loan needed to finance its purchase, marketing materials may be misleading or incomplete— and to overestimate their capacity to repay.4 for example, by emphasizing only positive aspects of products and neglecting to describe costs or risks. A comprehensive regulatory framework for disclosure and transparency includes multiple components.5 For exam- Key information may not be disclosed early enough in ple, there should be basic rules in place requiring that pro- the shopping and pre-transaction period, or it may be viders provide loan agreements that contain all terms and presented in a fragmented fashion. Key terms and condi- conditions, and that they disclose the total cost of a credit tions may be disclosed only in loan agreements received product using annual percentage rate (APR),6 total cost of at the time of signing the agreement, or they may be scattered across various documents (such as repayment schedules, fee charts, facility letters, and loan agree- For example, see Bertrand and Morse, “Information Disclosure, 4.  Cognitive Biases, and Payday Borrowing,” which found that ments). When buried in a loan agreement, information is information disclosure targeted at overcoming cognitive biases (by not likely to be read or understood by consumers. Infor- reinforcing how fees accompanying a loan add up over time and mation is often not presented in a straightforward man- presenting comparative APR information) reduced the take-up of future payday loans. For further details on developing a broader framework for 5.  For examples of the positive impact of disclosure, see “Financial 3.  disclosure and transparency, see “G20 High-Level Principles on Inclusion and Consumer Protection in Peru,” which found that Financial Consumer Protection,” “Effective Approaches to Support disclosing information about interest rates for consumer credit the Implementation of the G20 High-Level Principles,” the World contributed to a decrease in price; “CARD Act Report,” which Bank Group’s Good Practices for Financial Consumer Protection, found that the CARD Act in the United States (which included a and Chien, “Designing Disclosure Regimes.” number of provisions on disclosure and transparency) led to a Precise definitions of “effective” APR can vary across jurisdictions. 6.  reduction in fees and an overall decline in total cost of credit However, effective APR is generally considered to be an annualized (although it is unclear how much of that change is solely attribut- interest rate that takes into account fees and charges (such as origi- able to the CARD Act itself); and Jones, Loibl, and Tennyson, nation fees and monthly service charges), compounding, and the “Effects of Informational Nudges,” which found that new dis- net present value of repayments as compared to the net present closure requirements in the CARD Act were effective in inducing value of drawdowns. The formula for calculating effective APR households to increase the amount of credit card debt paid off typically incorporates certain assumptions (for example, no change each month. in the nominal interest rate for a variable rate loan). 4   Technical Note on Developing a Key Facts Statement for Consumer Credit credit, or similar metrics. Disclosure rules should also rates and allows for greater comparability across products ensure fair advertising and marketing that is not mislead- and providers than total cost of credit, particularly for ing. A well-designed key facts statement (KFS) is one com- loans with varying terms and repayment periods. Finally, ponent of this broader disclosure framework. Financial the installment amount for repayment serves a comple- literacy and financial capability are also important comple- mentary role to both total cost of credit and APR by help- ments to disclosure regimes. ing a consumer assess the affordability of a product in relation to his or her cash flow. In consumer testing, this A KFS summarizes total cost, fees and charges, and key figure has been noted to be particularly important to low- terms and conditions in a clear, simple format. Requiring income consumers.8 the use of a standardized KFS is more relevant for stan- dard consumer credit products such as personal loans or A clear, standardized definition of total cost of credit mortgages (compared to other credit products), as these should be provided by law that captures all normal, anti- products are more likely to have common product fea- cipated costs that arise during the term of a credit agree- tures across providers and to be used by mass consumers. ment. Establishing a comprehensive definition of total cost of credit is a critical first step for both the calculation A KFS increases the likelihood of consumer comprehen- of total cost of credit by providers as well as for the calcu- sion of a product’s affordability and risks and can lead to lation of APR. Providers are likely to calculate total cost of better decision-making. Recent research has shown that a credit inconsistently without a standardized definition standardized, simplified KFS significantly improves con- and clear guidelines, defeating the purpose of providing sumer decision-making compared to marketing materials, a metric that consumers can use to compare offerings increases price elasticity, and has three times the effect of across providers. financial education on better financial decision-making.7 A standardized KFS can thus help to facilitate product Total cost of credit should include all interest, fees, and comparison across multiple providers, encourage compe- charges expected to be incurred over the duration of the tition, reduce costs, and lead to better outcomes for con- loan, including fees for bundled services. Both up-front sumer welfare. fees (for example, administration fees, application fees, collateral appraisal fees, loan origination fees, credit refer- ence bureau fees, processing fees, drawdown fees) and CONTENT OF KEY FACTS 2.  recurring charges (such as maintenance fees and manda- STATEMENTS tory credit life insurance fees) should be included in total cost of credit calculations.9 Box 1 presents the definition of total cost of credit in the European Union. 2.1  TOTAL COST A KFS for consumer credit should clearly and prominently Standard assumptions that providers should make when convey the total cost of a loan via three methods: (1) total calculating fees and charges should be specified by policy cost of credit, (2) APR, and (3) installment amount for makers in order to achieve consistency across providers. repayment. These three methods of conveying cost serve For example, for purposes of calculating total cost of complementary purposes and allow for the greatest com- credit for pre-contractual disclosure in the United King- prehension and comparability. Both total cost of credit dom, it is assumed (if not otherwise specified) that the and APR more accurately convey the total cost of a loan interest rate stays at the initial level for the duration of product, including fees and charges and bundled services, agreement, that drawdown is immediate and in full, that than nominal interest rates. credit is provided for the period of one year and repaid in equal monthly installments, and that non-interest charges Total cost of credit conveys the total costs a borrower expressed as multiple payments (such as insurance pay- must pay for a loan product over the term of a loan as a monetary figure, which has been shown to be easier for the average consumer to comprehend than APR. On the For example, see Tiwari, Khandelwal, and Ramji, “How Do 8.  Microfinance Clients Understand Their Loans?,” and Collins, other hand, as an annualized, standardized, and com- Jentzsch, and Mazer, “Incorporating Consumer Research into pounded rate, APR is a more accurate means of convey- Consumer Protection Policy Making.” ing the full cost of a loan than nominal monthly interest Whether third-party fees are included in total cost of credit and 9.  APR, and what types of third-party fees, varies by jurisdiction. Policy makers may wish to focus on including those third-party fees that are incurred for third-party services that are required by Giné, Cuellar, and Mazer, “Information Disclosure and Demand 7.  the provider in order to obtain credit. Estimates for such fees Elasticity of Financial Products.” may need to be made in certain cases. Technical Note on Developing a Key Facts Statement for Consumer Credit   5 BOX 1 Definition of Total Cost of Credit from EU Consumer Credit Directive10 • All the costs, including interest, commissions, • Costs in respect of ancillary services relating to the taxes and any other kind of fees which the con- credit agreement, in particular insurance premi- sumer is required to pay in connection with the ums, are also included if, in addition, the conclu- credit agreement and which are known to the sion of a service contract is compulsory in order to creditor, except notarial costs; obtain the credit or to obtain it on the terms and conditions marketed. See Directive 2008/48/EC. 10.  ments) are paid in equal amounts on regular intervals flow covers the installment amount for repayment. Provid- beginning with the first repayment of capital.11 ers should be required to disclose prominently the regular installment amount for repayment as part of pre-contrac- A comprehensive definition of APR, and a standardized tual disclosure, as is the case in countries such as Bos- formula for its calculation, should also be provided by law nia-Herzegovina, Malaysia, Peru, the Philippines, and the in order to ensure that all necessary information on costs United Kingdom. Consumers should also receive a full is conveyed to consumers. APR can be viewed conceptu- repayment schedule describing the precise timing of all ally as the conversion of total cost of credit, including installment repayments when signing the loan agreement interest rates and fees and charges, into a standardized (which should indicate where there are variations in the annual rate. Unlike total cost of credit, APR can be used to installment amount—for example, for the first or final make it easier to compare loans of different sizes, terms, installment payment). and repayment schedules. A formula should be provided for its calculation that equalizes the net present value of all In addition to disclosing total cost, KFSs can also include drawdowns with the net present value of all repayments other key figures related to financing. In particular, the (including loan repayments, interest, and fees and total amount that a borrower pays after making all pay- charges). As with total cost of credit, a representative ments should also be disclosed prominently in a KFS. (For example and certain assumptions regarding the amount an example, see figure 1.) This amount represents the sum and timing of repayments may be necessary to calculate of the amount of the loan principal plus the total cost of APR during the pre-contractual stage.12 For example, Bos- credit, thereby representing all payments made by the nia-Herzegovina and the United Kingdom require clear borrower over the term of the loan. Additional basic infor- and prominent disclosure of APR or effective interest rate, mation about the loan that could be considered for inclu- a similar metric to APR, and provide detailed formulas and sion in a KFS include the total amount of the loan, total rules regarding its calculation.13 amount received by the borrower, total interest payments, total other payments, and term of the loan. However, the The installment amount for repayment serves a comple- general principle to keep in mind is to limit the content of mentary role to both total cost of credit and APR. In prac- KFSs to critical information only. tice, many low-income consumers determine whether a loan product is affordable by assessing whether their cash It is open to debate whether to include nominal interest rate in a KFS. Nominal interest rate conveys the price of the 11.  For further details on these and other types of assumptions that loan, but not the total cost. While it is arguably a fundamen- may be necessary, see Appendix 1.2.5 in the United Kingdom’s tal component of a credit product and one that may be Consumer Credit Sourcebook. Note that the Sourcebook replaces expected by consumers, research has found that disclosing and consolidates various regulations previously issued on consumer credit prior to the creation of the Financial Conduct both nominal interest rate as well as APR in a KFS can con- Authority in 2013. However, certain provisions of the Consumer fuse consumers.14 If including both interest rates in a KFS, it Credit Act of 1974 and secondary legislation issued under the Act still remain in force, including rules on pre-contract credit information. For example, focus group testing of disclosure formats for credit 14.  12.  See 3.5.5 in the Consumer Credit Sourcebook regarding the products in the Philippines found that consumers were confused requirements for a representative example. when both nominal and effective interest rates were included on 13.  For a further example, see the APR calculator (simulator) provided the forms and preferred to have only the effective interest rate by the European Union. displayed. See Collins, Jentzsch, and Mazer, “Incorporating Consumer Research into Consumer Protection Policy Making.” 6   Technical Note on Developing a Key Facts Statement for Consumer Credit is advisable to ensure that, at a minimum, there is guidance ized, including both up-front fees and charges as well as on how the two interest rates relate to one another. those that are anticipated throughout the term of the loan. Common fees to highlight could include applica- tion and documentation fees, credit reference bureau 2.2  FEES AND CHARGES fees, drawdown fees, quarterly maintenance fees, and mandatory credit life insurance fees. Recurring fees A KFS should highlight the most common, significant should be listed by applicable time period and also fees broken out from the total cost of credit and item- summed up in a box conveying total up-front and recur- FIGURE 1: Illustrative Key Facts Statement for Consumer Credit (see Annex A) KEY FACTS STATEMENT FOR CONSUMER CREDIT * Review carefully before agreeing to a loan.* SECTION I: KEY TERMS LOAN SUMMARY COST OF CREDIT REPAYMENT SCHEDULE 1. Amount of Loan CUR______ 4. Interest CUR _________ 7. Date First ___ /___ /___ Amount you Interest you will be Payment Due are borrowing charged on the loan 8. Number of ___________ Payments 2. Duration of Loan ___________ 5. Other Fees and CUR_________ 9. Payment ___________ Agreement Charges Frequency See details in Section III 3. Amount Received CUR______ 6. Annual 7. Total Cost of Credit 10. Amount Per CUR_________ Amount you actually Percentage Rate All costs for the Payment receive from the Total Cost of Credit loan, including Includes capital, lender as a comparable interest and fees interest, and annual percentage CUR_________ recurring ________% 1. Amount of Loan 7. Total Cost of Credit 11. TOTAL AMOUNT YOU PAY + = Amount you are All costs for the loan, Total amount you pay after borrowing including interest and fees making all payments CUR_________ CUR_________ CUR_________ This loan: 7.41% APR Avg. best High cost zone APR 6.50% 7.00% 7.50% 8.00% ... 12.00% SECTION II: YOUR RIGHTS AND OBLIGATIONS 3 Any questions or complaints? Call [TELEPHONE], email [EMAIL ADDRESS], or write to [MAILING ADDRESS] to contact us regarding your question or complaint. 3 Unsatisfied with our response to your question or complaint? Contact the [EXTERNAL DISPUTE RESOLUTION BODY] for help at [TELEPHONE] or [EMAIL], write to [ADDRESS], or visit [WEBSITE]. 3 Want to pay off your loan early? You can do so without any penalties or fees. 3 You may cancel the loan agreement within a period of [XX] calendar days after signing the agreement. * This information is not final until signed by all parties, and does not replace the loan agreement. You have the right to a copy of the full loan agreement. * * This information is valid for [TIME PERIOD]. * Technical Note on Developing a Key Facts Statement for Consumer Credit   7 ring fees and charges (excluding interest). For an exam- be summed up and presented as “other” fees in the ple, see figure 2. KFS, while actual loan agreements and readily available price lists should list all fees and charges in itemized Although regulation can provide a comprehensive list of fashion.15 the types of anticipated fees and charges that should be disclosed, policy makers should choose which standard- As a separate though related policy measure, policy makers may 15.  ized fees and charges to include in a KFS on an itemized also wish to consider the need to standardize certain basic fees basis. Such fees and charges should be selected based and charges and the terminology for such fees and charges on whether they are determined to be priority due to across the industry. In many countries, different types of fees and charges, as well as different names for the same fees and charges, being broadly applicable, significant, or known to be can lead to confusion for consumers and difficulties in comparing hidden or misleading. Remaining, lower priority fees can products across providers. FIGURE 2: Illustrative Key Facts Statement for Consumer Credit (see Annex A) SECTION III: UPFRONT AND RECURRING FEES UPFRONT FEES UPFRONT FEES RECURRING FEES Arrangement fee o  CUR________ Collateral appraisal o  CUR _________ Credit life insurance o  CUR________ per ________ Documentation fee o  CUR________ Credit history check o  CUR_________ Management fee o  CUR________ per ________ Other fees (list all) o  CUR________ ____________________ TOTAL UPFRONT AND ____________________ RECURRING FEES AND CHARGES (EXCLUDING INTEREST) CUR______________ ____________________ ____________________ SECTION IV: IMPORTANT TERMS AND CONDITIONS TO CONSIDER LATE PAYMENT PENALTIES TERMS AND CONDITIONS TERMS AND CONDITIONS o  Late fees if payment CUR________ o  Cash deposit CUR _________ o  Variable interest CUR________ is more than _________ mandatory savings: rate applies days late o  Default interest if ________% per o  COLLATERAL: You are committing the o  Other payment is more than following as collateral: _____________________________________ _________ days late _____________ _________________________________________ _____________________________________ _________________________________________ _____________________________________ _________________________________________ _____________________________________ * Late or missing payments may have severe consequences on your collateral and your credit history, hurting your ability to reborrow. * CERTIFIED CORRECT: I ACKNOWLEDGE RECEIPT OF THIS I ACKNOWLEDGE RECEIPT OF THIS STATEMENT PRIOR TO SIGNING THE STATEMENT PRIOR TO SIGNING THE LOAN AGREEMENT: THE GUARANTEE: _____________________________________ _____________________________________ _____________________________________ Credit provider representative Borrower Guarantor (if applicable) Name of Borrower: Application No: Date prepared: Note: This KFS is a generic illustration only, provided to help the reader visualize elements discussed in this technical note. The APR graphic from the preceding page is from Hogarth and Merry, “Designing Disclosures.” See source for descriptions of “Avg. Best APR” and “high cost zone.” 8   Technical Note on Developing a Key Facts Statement for Consumer Credit Information should also be disclosed on potential fees The KFS itself can indicate that complete information on and charges that can be triggered by future events, such fees and charges and other terms and conditions can be as late fees and prepayment penalties, so that consumers found in the loan agreement. can adequately assess these risks. (See figure 3.) Given the potential for there to be a range of contingent fees, some For example, late-payment penalties and prepayment of which may pose less risk or concern, policy makers penalties must be disclosed in Peru and Malaysia. In should select a set of contingent fees that warrant high- Bosnia-Herzegovina and the United Kingdom, the fact lighting in a KFS given the potential impact on the con- that certain other charges may apply during the course of sumer. Complementary requirements could also be put in the loan and the conditions under which they would apply place for provider staff to orally disclose the conditions for must also be disclosed. the application and calculation of such fees or penalties. FIGURE 3: Illustrative Key Facts Statement for Consumer Credit (see Annex A) SECTION III: UPFRONT AND RECURRING FEES UPFRONT FEES UPFRONT FEES RECURRING FEES Arrangement fee o  CUR________ Collateral appraisal o  CUR _________ Credit life insurance o  CUR________ per ________ Documentation fee o  CUR________ Credit history check o  CUR_________ Management fee o  CUR________ per ________ Other fees (list all) o  CUR________ ____________________ TOTAL UPFRONT AND ____________________ RECURRING FEES AND CHARGES (EXCLUDING INTEREST) CUR______________ ____________________ ____________________ SECTION IV: IMPORTANT TERMS AND CONDITIONS TO CONSIDER LATE PAYMENT PENALTIES TERMS AND CONDITIONS TERMS AND CONDITIONS o  Late fees if payment CUR________ o  Cash deposit CUR _________ o  Variable interest CUR________ is more than _________ mandatory savings: rate applies days late o  Default interest if ________% per o  COLLATERAL: You are committing the o  Other payment is more than following as collateral: _____________________________________ _________ days late _____________ _________________________________________ _____________________________________ _________________________________________ _____________________________________ _________________________________________ _____________________________________ * Late or missing payments may have severe consequences on your collateral and your credit history, hurting your ability to reborrow. * CERTIFIED CORRECT: I ACKNOWLEDGE RECEIPT OF THIS I ACKNOWLEDGE RECEIPT OF THIS STATEMENT PRIOR TO SIGNING THE STATEMENT PRIOR TO SIGNING THE LOAN AGREEMENT: THE GUARANTEE: _____________________________________ _____________________________________ _____________________________________ Credit provider representative Borrower Guarantor (if applicable) Name of Borrower: Application No: Date prepared: Note: This KFS is a generic illustration only, provided to help the reader visualize elements discussed in this technical note. The APR graphic from the preceding page is from Hogarth and Merry, “Designing Disclosures.” See source for descriptions of “Avg. Best APR” and “high cost zone.” Technical Note on Developing a Key Facts Statement for Consumer Credit   9 2.3  TERMS AND CONDITIONS reference bureau, a KFS should aim to convey briefly the implications of such conditions. A clear and concise expla- In addition to cost metrics, fees, and charges, other terms nation of why and how interest rates may change and the and conditions that are deemed critical for pre-contractual impact on repayment amounts and total cost of credit is disclosure should be included in a KFS. As with disclosure recommended. For example, when interest rates are vari- of fees and charges, pre-contractual disclosure of terms able, providers in Peru are required to disclose the criteria and conditions should focus on those items that pose for modification of rates. Similarly, as low-income consum- greater risks, uncertainty, or additional costs to consumers. ers may not understand the implications of a negative Regulation should provide guidance on the list of priority credit history, the implications of being reported to a terms and conditions that should be disclosed where credit reference bureau could be briefly noted in a KFS. applicable. Terms and conditions—such as cash collateral/ mandatory savings requirements, default interest rates, The availability of recourse mechanisms and the existence and whether the borrower has the right to prepay the loan of cooling-off periods should also be disclosed in a KFS. without any penalties—should be disclosed in a KFS. For example, the Pre-Agreement Truth in Lending Disclo- sure Statement in Ghana includes information on cool- For terms and conditions such as the variability of interest ing-off periods and customer service at the bottom of the rates and the conditions for being reported to a credit statement. (See figure 4.) For recourse mechanisms, a KFS FIGURE 4: Pre-Agreement Truth in Lending Disclosure Statement in Ghana16 Disclosure and Product Transparency Rules, Annex 2 (“Pre-Agreement Truth in Lending Disclosure Statement”). 16.  10   Technical Note on Developing a Key Facts Statement for Consumer Credit should identify the contact information for submitting or encouraged or what particular risks need highlighting complaints to the provider, as well as how to submit com- in their country and tailor the KFS to address these spe- plaints to an external dispute-resolution mechanism if not cific objectives. For example, the Product Disclosure satisfied with resolution efforts by the provider. Consumer Sheet for Personal Loans in Malaysia includes explicit testing in the Philippines also found that consumers prefer warnings to consumers that legal action may be taken to have recourse mechanisms displayed prominently on against them if they do not keep up with repayments. the front page of disclosure statements.17 (See figure 5.) Other important messages or warnings that can be highlighted in KFSs include the fact that the customer may lose their collateral or that failure to repay 2.4  MESSAGES AND WARNINGS the loan will harm a customer’s credit history. For exam- ple, the KFS for consumer credit in Zambia includes a A KFS should give visual prominence to important mes- section on risks that notes (in bold, red font) that “late or sages that are intended to be prioritized for consumers missing payments may be reported to a credit reference in that particular country. Policy makers should consider bureau and may severely affect your financial situation, what consumer behaviors are meant to be discouraged collateral, and ability to reborrow.”18 See Collins, Jentzsch, and Mazer, “Incorporating Consumer 17.  “Removal of Interest Rate Caps and Consumer Protection 18.  Research into Consumer Protection Policy Making.” Measures,” Annex 1 (“Key Facts Statement for Consumer Credit”). FIGURE 5: Product Disclosure Sheet for Personal Loans in Malaysia19 “Guidelines on Product Transparency and Disclosure,” Schedule I (“Conventional Banking Products”), Appendix II 19.  (“Product Disclosure Sheet Samples”), Section B (“Personal Loan”). Technical Note on Developing a Key Facts Statement for Consumer Credit   11  ESIGN OF KEY FACTS 3. D More detailed information is best left on the second (back) page of a KFS. For example, the back page can be STATEMENTS used to convey information regarding key fees and charges and terms and conditions.21 The manner in which information is disclosed to consum- ers is as important as the actual information required to be The visual design of a KFS should be easy to read and not disclosed. A standardized KFS should be designed to overcrowded with text and information. A KFS should enable consumers to comprehend the disclosed informa- focus on presenting key information prominently and tion and to facilitate comparison-shopping. While policy have a clear and uncluttered format with sufficient white makers may consider providing a limited degree of flexi- space. Boxes, bold font, and highlighting should be used bility for providers to use their own branding, logos, and to draw a reader’s attention to critical information. color schemes, the core design and format of a KFS should be made consistent across providers. Requirements regarding the use of color should be con- sidered carefully. While color can potentially assist in “Less is more” is an important rule—too much information emphasizing key information, policy makers should con- in a format that does not highlight key items will over- sider whether mandating color elements is practical and whelm consumers and ultimately prove ineffective. There- effective given the country context. For example, this fore, a KFS should aim to strike a careful balance, providing could effectively mean requiring color printing at all pro- sufficient information on total costs, key charges, and key vider locations (including agents), increasing compliance terms and conditions while not including so much informa- costs for providers. tion that consumers become confused. Among other important design considerations, a KFS for consumer Graphics can be employed strategically to visualize key credit should (1) preferably be kept to one to two pages in concepts that are difficult to grasp, such as APR compar- length, (2) be limited to critical information, (3) highlight isons. Contextual information can be quite helpful in key information visually by means of a summary box, bold improving consumer comprehension by framing infor- font, and graphics, and (4) use standardized terms and mation in a more familiar context or providing reference plain language and include intuitive descriptions.20 points. For example, to help consumers better under- stand APR, a graphic could illustrate where APR falls within a range of APRs for similar loans in the market. 3.1  DESIGN ELEMENTS (See figure 7.) Similarly, as total amount repayable rep- resents the sum of the amount of the loan principal plus A summary box containing key cost information should be total cost of credit, a simple and straightforward graphi- placed in the top half of the first page of a KFS. This top cal equation could be provided in the KFS to illustrate half of the first page is typically the section on which con- this relationship. (See annex A.) sumers will focus the most attention. Total cost of credit and APR should be displayed prominently in this box. Additional financing information that could be considered for inclusion in the summary box includes the total amount 3.2  LANGUAGE ELEMENTS of the loan, total amount received by the borrower, total Regulation should include rules on legible font size and amount of repayments, total interest payments, total plain-language requirements for KFSs. Providers should other payments, term of the loan, and amount, number, be required to use clear, simple language. In South and frequency of repayment installments. For example, Africa, documents must use “plain language,” which is the Pre-Agreement Statement and Quotation for Small further described as language for which it is reasonable Credit Agreements in South Africa includes a summary to conclude that an ordinary consumer of the class of box at the top of the page that includes total cost metrics, persons for whom the document is intended, with aver- key up-front and recurring fees and charges, and repay- age literacy skills and minimal credit experience, could ment information. (See figure 6.) For example, when the Federal Trade Commission in the United 21.  20.  For example, consumer testing in the United States found that States was designing and testing a new form of mortgage disclosure language should be plain but meaningful; that carefully disclosure for consumers in order to improve effectiveness, it designed visual elements can increase a reader’s willingness to found that conveying key costs in simple, easy-to-understand read the disclosure and help him or her navigate the document; language, excluding less important or confusing information, and and that contextual information framing the information pre- layering information so that summary information was on the first sented can improve comprehension. For further details, see page and more detailed information was on subsequent pages Hogarth and Merry, “Designing Disclosures.” improved the effectiveness of disclosure. 12   Technical Note on Developing a Key Facts Statement for Consumer Credit FIGURE 6: Pre-Agreement Statement and Quotation for Small Credit Agreements in South Africa22 Regulations Made in Terms of the National Credit Act, 2005, Form 20. 22.  Technical Note on Developing a Key Facts Statement for Consumer Credit   13 FIGURE 7: Graphic Showing APR in Relation to APRs on Similar Loans23 ANNUAL PERCENTAGE RATE (APR) This loan: 7.41% APR Overall cost of this loan, Avg. best including interest and 7.41% APR APR High cost zone settlement charges: 6.50% 7.00% 7.50% 8.00% ... 12.00% How does this loan compare? For the week of February 23, 2009, the average APR on similar conforming loans offered to applicants with excellent credit was 6.50%. Today, an APR of 8.00% or above is considered high cost and is usually available to applicants with poor credit history. How much could I save by lowering my APR? For this loan, a 1% reduction in the APR could save you an average of $135 each month. From mortgage disclosure forms proposed by the Federal Reserve Board in the United States in 2009. For more details, see Hogarth and 23.  Merry, “Designing Disclosures.” be expected to understand the content, significance, explains that “APR” reflects “the cost of credit you are and importance of the document without undue effort. taking on a yearly basis. It is a useful tool to compare In Peru, disclosed information must be of a font size that costs of similar loans and credits.” is sufficiently legible, with phrasing and terms that are comprehensible to clients. In some countries, the font size and type is mandated by law. 3.3 FORMAT Policy makers should consider in what languages KFSs KFSs in some countries are short and concise, providing must be produced. KFSs should be provided in the offi- only material information and using summary sections, cial language of a country. In addition, providers could boxes, bold font, or narrative-like sections to focus read- also be required to produce (or at least have available) ers’ attention. Examples follow. (See annex B for full cop- KFSs in the most commonly used local languages. Such ies of these disclosure documents.) requirements would need to be balanced with cost con- • The Pre-Agreement Statement and Quotation for siderations for providers. This will require balancing Small Credit Agreements in South Africa25 includes a compliance costs for providers against the potential summary box at the top of the page including total benefits for financial inclusion and overall consumer cost metrics, key up-front and recurring fees and understanding. charges, and repayment information. The form itself is clearly split into sections (summary, additional charges, Standardized terms and simple terminology should be optional items, security, repayment arrangements), used to facilitate reader comprehension and compari- with each section organized in a table format. son. In particular, a brief explanation of what APR is and how it can be used should be included in KFSs, as the • The Format of Disclosure Statement on Small Busi- concept of APR is not well understood by consumers. ness/Retail/Consumer Credit in the Philippines26 uses KFSs in Ghana (see figure 8) and the United Kingdom24 boxes and bold font to highlight loan amount, total include short, intuitive descriptions accompanying key charges, net proceeds of the loan, and effective terms. One such description explains that the “total interest rate. The form is one page in length (with a amount you will have to pay” means “the amount you repayment schedule as an annex), limited to six num- have borrowed plus interest and other costs.” Another Regulations Made in Terms of the National Credit Act, 2005, 25.  24.  Consumer Credit (Disclosure of Information) Regulations 2010, Form 20. Schedule 1 (“Pre-Contract Credit Information”). Manual of Regulations for Banks, Appendix 19. 26.  14   Technical Note on Developing a Key Facts Statement for Consumer Credit FIGURE 8: Pre-Agreement Truth in Lending Disclosure Statement in Ghana27 Disclosure and Product Transparency Rules, Annex 2 (“Pre-Agreement Truth in Lending Disclosure Statement”). 27.  bered sections, and contains no additional text or much more description on how and when certain fees and explanations. conditions apply. While more comprehensive, the length and level of detail of these forms may decrease consumer • The Product Disclosure Sheet for Personal Loans in comprehension, particularly for low-income and low-liter- Malaysia is organized in a narrative-like format and acy consumers, and result in priority information being lost broken down by question headings (that is, “What among other information. are my obligations?,” “What are the fees and charges I have to pay?”). It is similarly brief (less than two As can be seen by the examples cited, there are many pages), prioritizes disclosure of cost information, uses different ways to approach designing a KFS and many bold font to highlight key items such as the effective competing concerns to balance. Policy makers will need lending rate and the total amount of repayments, and to weigh the trade-offs between longer, more compre- is limited to material information with no extraneous hensive KFSs and shorter, concise KFSs. Consumer test- descriptions.28 ing (further discussed in section 9) can be used to help ensure that KFSs are effective in addressing each coun- A contrasting approach is a longer, more comprehensive try’s specific consumer protection concerns. KFS. The Standard European Consumer Credit Informa- tion form and its equivalent in the United Kingdom use a A basic KFS for consumer credit is included in annex A, longer format, containing more detailed information on a illustrating many of the recommendations listed herein. wider range of terms and conditions beyond cost, and Provided to help the reader visualize the elements dis- cussed in this technical note, it should be considered a generic illustration only. It represents only one possible  study by Bank Negara Malaysia on the effectiveness of their 28. A starting point for the task of designing a KFS. Further product disclosure sheets found that they could be made still design elements would be required to enhance the more user-friendly by reducing their length (completed sheets ranged from four to eight pages), adding visual aids, and using statement, and tailoring to the circumstances of a partic- more plain language and less lengthy narratives. ular country would be needed as well. Technical Note on Developing a Key Facts Statement for Consumer Credit   15  RAL COMMUNICATION AND 4. O For example, such approaches to oral communication are STAFF TRAINING utilized in Malaysia and Rwanda. Providers in Malaysia are required to highlight key contractual terms and condi- Providers should be required to provide adequate oral tions, including cooling-off rights and liability for loss, and explanations for any information in KFSs that may raise to inform customers of hotlines or contact details for feed- questions among consumers. As noted previously, it is back, enquiry, or complaint channels. In Rwanda, provid- counter-productive to include too much information in a ers are required to provide “adequate oral explanations KFS. Presenting information both in a written document for any information provided in the key facts statements, and through face-to-face communication can enhance or with regard to Annual Percentage Rate, about which consumer comprehension. Establishing clear rules for the consumer has question or concern.”29 what information should be conveyed to consumers orally during the pre-contractual stage can both reinforce and Providers should be required to train their staff to be expand upon written disclosure. In effect, these require- able to convey information in KFSs effectively. Staff train- ments create a “duty” on the part of the provider not only ing is necessary to ensure familiarity with the content and to hand over a written disclosure document but also to purpose of, and requirements with respect to, KFSs. ensure that a potential customer comprehends the con- Such requirements should apply to sales agents and cus- tents of a KFS. For consumers with lower levels of literacy, tomer representatives in particular. Staff should be able or who are unfamiliar with financial terminology, oral com- to explain cost metrics to consumers, including low-liter- munication is particularly important. acy consumers, and be aware of any particular oral com- munication requirements. For example, providers in Peru Again, policy makers will need to consider carefully how must designate personnel to be specially trained in cus- to determine the scope and design of such require- tomer service to respond to clients’ questions and to ments. Considerations include to what extent providers resolve any questions regarding form contracts (which will be mandated to give verbal explanations about spe- are made publicly available in advance). In Malaysia, cific items automatically to all consumers; to what extent management must ensure that staff, particularly those the onus will be placed on providers to judge where such involved in selling and marketing financial products and oral explanations are necessary, depending on the type services, are adequately trained and have sufficient of product and customer characteristics (such as limited knowledge of disclosure requirements, products, and literacy); and to what extent explanations will be required their operations. Policy makers may also wish to consider only on request, but perhaps with an obligation to make special requirements, such as specially trained staff, to consumers actively aware that they have the right to ask assist consumers who speak only common local lan- for further explanations and clarifications. guages or who are affected by a disability. For example, providers should be required to communi- Both consumers as well as provider staff should be cate material terms and concepts orally to potential cus- required to sign a KFS, which should be retained by the tomers who require more detailed explanations than a provider. These signatures are an added confirmation KFS can convey easily. These types of requirements that a finalized KFS was received and reviewed by the should strategically target those issues for which written consumer at the point of sale.30 For example, such a disclosure may be insufficient, providing further context to requirement exists in Ghana, Peru, the Philippines, and enable potential customers to fully understand the fea- South Africa. In Armenia, three fields for customer signa- tures of a product and the risks they are undertaking. This tures are placed near important terms and conditions of could include rights of customers, such as recourse mech- the loan (for example, fees and penalties) and at the end anisms and cooling-off periods, or information regarding of the KFS. During the signing process, the customer is bundled services, such as mandatory credit life insurance. instructed to sign the KFS three times but is not told Requiring a brief oral explanation of the meaning and pur- pose of APR could also be considered. Product features that are triggered by future events (such as variable inter- Determining Key Facts Statements and Disclosure of Annual 29.  est rates, prepayment penalties, late fees, and default Percentage Rates for Fixed Term Credit Contracts. interest rates) should also be explained through face-to- Where a consumer credit product involves a guarantor, the 30.  guarantor could also be required to sign the KFS in order to face interaction. The conditions that trigger these events ensure that the guarantor has received key information about the and what processes to expect when such events occur credit product (in addition to other information that should be should be conveyed as well. provided regarding the guarantee itself). 16   Technical Note on Developing a Key Facts Statement for Consumer Credit where to put these signatures, thereby forcing him or her to be representative of the consumer credit agreements to review the whole KFS more closely.31 Financial service to which a representative APR applies and which are providers should be required to provide a signed copy of expected to be entered into as a result of the advertise- the KFS to consumers, to retain signed copies for a rea- ment. The representative APR must reflect at least 51 sonable number of years, and to make the copies avail- percent of the business expected to result from the able during inspections by supervisory authorities. advertisement. A note should be included in such generic KFSs indicating that such assumptions have been made and that the terms of the final product 5.  TIMING AND MANNER OF offered to the customer will likely change. PROVISION A personalized KFS should be provided to a potential customer during the pre-transactional stage, before a When information is disclosed is an important component loan agreement is entered into. Once the consumer indi- of an effective disclosure framework. Bank Negara Malay- cates an intention to enter into a loan agreement, the sia studied the effectiveness of product disclosure sheets provider should be required to make available a person- and found that consumers’ awareness of the existence alized KFS incorporating all consumer-specific variables and purpose of such sheets was low. In many cases, the known at the time. disclosure sheets were provided to consumers only after a decision had already been made to purchase the product. A general, flexible standard should be established as to Disclosure via KFSs delivered at multiple stages can help how early in the process pre-contractual information to reinforce the information conveyed and improve the should be provided to consumers. Rather than designate likelihood of consumer comprehension and usage. In a set time period for a consumer to become familiarized order to ensure that information does not arrive too late in with a KFS, which may be impractical and objectionable to the decision-making process to be utilized by consumers, providers, staff could be required to communicate to con- a version of KFSs should be made available during the sumers specifically that they have the right to take KFSs following stages: (1) the shopping stage, (2) the pre-trans- away with them and review them at their own speed and actional stage, and (3) the transaction stage. convenience (and not in a pressurized setting, such as in front of provider staff at the branch). For example, in the KFSs should be made available during the shopping stage United Kingdom, pre-contractual information must be through a variety of convenient and accessible channels. provided “in good time before the agreement is made.”32 Disclosure as early as possible during the shopping stage Regulations further explain that “in good time” may is critical, as this is when information can highly influence depend on the precise circumstances of the transaction, consumers’ decision-making processes regarding which but in all circumstances, the borrower must be given ade- product or service to purchase. At any time prior to a con- quate opportunity to consider the pre-contractual infor- sumer indicating an intention to enter into a loan agree- mation before being invited to sign the credit agreement. ment, a provider should be required to make available a generic KFS. The statement should be made available KFSs provided during the shopping and pre-transactional through a variety of channels, including advertising mate- stages should indicate how long the terms and conditions rials, websites, branches, and upon request. included therein will remain valid. When a borrower first applies for a loan, the pre-transactional KFS will most A KFS during the shopping stage will necessarily be likely need to be preliminary pending processing of the generic, but it should be required to contain reasonable borrower’s application. KFSs should therefore highlight assumptions regarding the average type of loan or aver- the fact that the final interest rate, term of the loan, and age consumer. Because total cost of credit, APR, and installment amount for repayment may vary from what is other cost metrics will be based at this stage on hypo- included in the pre-transactional KFS, which will affect the theticals and not tied to a particular customer, disclosure final total cost of credit, APR, and total amount the bor- requirements should require that providers use a reason- rower will pay. able representative example. For example, in the United Kingdom, the standard information disclosed in adver- A final KFS should be provided at the signing of the loan tisements must be what the advertiser reasonably expects agreement. The final KFS should be provided at the point-  ee Procedure, Terms, Forms and the Minimum Requirements for 31. S See Consumer Credit (Disclosure of Information) Regulations 32.  Communication Between Bank and Depositor, Creditor and 2010. Consumer. Technical Note on Developing a Key Facts Statement for Consumer Credit   17 of-sale stage and have all key costs, fees and charges, and ical focus would be on the most common, standardized terms and conditions fixed. If any items in the final KFS credit products used by mass consumers. As noted previ- have changed since the pre-transactional KFS was pro- ously, many of the recommendations provided in this vided, these changes should be highlighted to the bor- technical note and in the sample KFS included in annex A rower. Providers should be required to give the KFS are tailored to personal installment loans with a fixed prominent placement when it is handed to the consumer. term. Modifications will be required for mortgages, revolv- For example, the KFS should be the first two pages or on ing loans, lines of credit, credit cards, or other types of top of other documentation, such as marketing materials consumer credit.35 or a form loan agreement. Policy makers may also wish to consider whether the requirement for KFSs should be limited to loans below or 6. SCOPE OF APPLICATION above a certain size. The rationale is to focus the use of a standardized KFS on common loans with standard fea- Ideally, the same form of KFS should be used by all pro- tures, and to exclude loans that are either too small (as viders of consumer credit in a country, including banks these loans arguably pose less risk to consumers and KFSs and non-bank financial institutions (NBFIs), such as finan- may be impractical and costly to implement for such cial cooperatives, microfinance institutions (MFIs), payday loans) or, conversely, too large (as these loans may be lenders, and money lenders. Having a standardized KFS more complicated than a standardized KFS allows for and across all providers of consumer credit is critical for effec- the borrowers of such loans are likely to be more finan- tiveness, as this creates a level playing field, provides con- cially sophisticated). sumers with equal and comprehensive levels of protection, allows for easy comparison shopping, and increases con- However, typical consumers for certain types of small sumers’ comprehension and familiarity with the standard- loans may be disproportionately vulnerable to and ized KFS. However, this is often not the case in practice, as harmed by poor disclosure and transparency. The KFS requirements tend to vary depending on type of pro- approach to this topic varies across countries, given that vider and are less commonly applied to NBFIs.33 there are competing policy concerns to balance. As one example, the disclosure regime in Armenia applies to con- Given that certain types of consumer credit providers sumer credit agreements for amounts between 100,000 may fall under the oversight of different agencies, and 10 million Armenian drams (USD 206–USD 20,547). requirements for the use of a common KFS may need to Alternatively, regulation could define “consumer credit” be coordinated and harmonized. For example, in the Phil- using a more qualitative than quantitative approach, to ippines, some NBFIs are supervised by the Bangko Sen- allow for flexible application and to ensure that consumers tral ng Pilipinas (BSP), while MFIs are overseen by the of microloans in particular are sufficiently protected. Securities and Exchange Commission (SEC). To provide for consistent application of disclosure rules, the BSP reached out to the SEC to harmonize requirements. As a DIGITAL CREDIT AND DIGITAL 7.  result, the SEC issued a circular to its own lending and DISCLOSURE financing companies adopting the BSP’s disclosure requirements (including those pertaining to KFSs).34 Digital financial services involve new products and busi- ness models (such as digital credit), new delivery channels Policy makers will also need to consider for which types of (such as mobile phones and agents), and new providers consumer credit products KFSs should be required. A log- (such as mobile network operators and peer-to-peer lend- ers). While providing substantial benefits for financial inclusion, digital financial services can raise new financial For example, 124 jurisdictions were surveyed on their approaches 33.  consumer protection concerns or heighten existing con- to key financial consumer protection topics. Of them, 81 juris- dictions (65 percent) reported that a KFS (or similar document) cerns. While covering these topics extensively is beyond was required for at least one financial product for commercial banks, but the requirement was significantly less common for other types of financial service providers, even for common For example, see Directive 2014/17/EU on credit agreements for 35.  financial products and services. See Global Financial Inclusion consumers relating to residential immovable property. The and Consumer Protection Survey. directive amends the definition of total cost of credit from See SEC Memorandum Circular No. 7, issued by the Securities 34.  Directive 2008/48/EC to include such items as the cost of and Exchange Commission in September 2011 and addressed to valuation of property where such valuation is necessary to obtain all lending and financing companies. It adopted Circular No. 730 the credit and fees required to obtain the credit, such as fees for of July 2011 issued by the BSP. life insurance or fire insurance. 18   Technical Note on Developing a Key Facts Statement for Consumer Credit the scope of this technical note, this section will highlight information could include the use of standardized icons to a few key concerns regarding digital credit offered via convey key terms or concepts in an easily digestible man- mobile phones and emerging approaches to address ner, and layered messaging (that is, presenting key sum- these concerns. mary information on an initial screen and making more detailed information available by clicking through to addi- The nature of digital credit transactions, which are often tional screens).38 remote, occur at rapid speeds, and are conducted via small mobile screens, raises multiple risks for consumers. The design of the interactive process for obtaining a dig- Disclosure of information via digital channels such as ital credit product on a mobile phone can also be used mobile phones is often less comprehensive and more dif- to draw consumer attention to certain terms and condi- ficult to read. Digital credit products offered via mobile tions. For example, before a consumer reaches the final phones will necessarily involve a more limited visual for- screen to obtain a digital credit product, a separate mat as a result of device and network limitations (such as screen could be used to highlight key risks, such as smaller screen size and, depending on USSD versus late-payment penalties. Consumers can also be taken full-feature smartphones, lower graphical capabilities). through a screen that requires them to actively agree to Furthermore, given the remote nature of the transactions, terms and conditions (and includes a click-through to a the opportunity to supplement written information with summary of key terms and conditions) before being able oral explanations from provider staff ranges from limited to proceed with their loan application.39 to none. Consumers should also be able to read, store, and retrieve The current practices of digital credit providers often fall disclosed information without unreasonable effort and short of international good practices for disclosure and for a reasonable time period. Given that it may not be transparency. For example, a recent review of 18 digital possible to provide consumers with a full KFS, policy financial services user agreements from nine African coun- makers should consider what other protections may be tries36 found that user agreements often contained com- needed to compensate—for example, cooling-off peri- plex language that was difficult for consumers to ods for sales of digital credit. Another approach may be understand. In addition, not all fees and charges were dis- to ensure easy access to hard copies of more compre- closed; rather, consumers who wanted more complete hensive information than can be disclosed via mobile information were often referred to provider websites or phones. The Australian Securities and Investments Com- publications that were available only at physical locations. mission recommends that providers “make it easy for cli- Similarly, a review of digital lenders’ disclosure practices in ents to request a digital copy of the disclosure at no cost Kenya and Tanzania found numerous failings, including to the client (e.g., by providing a toll-free telephone inaccurate presentation of costs (including a lack of APR number or an electronic address or a request button cli- and no disclosure of fees for bundled services), failure to ents can use to request a copy).”40 disclose full terms and conditions, and lack of a KFS sum- marizing key terms and conditions.37 Finally, whether the existing consumer protection frame- work applies to all digital credit providers often poses a The same general principles for KFSs discussed herein problem. In many countries, existing disclosure rules may should be applied to digital credit products, but adapta- not apply to all providers of digital credit, as some provid- tions will be required. The core requirements regarding ers do not fall under the oversight of a financial sector the content of disclosure—such as requiring standardized authority. As noted in section 6, policy makers should calculation and presentation of APR and total cost of make efforts to ensure that there is comprehensive pro- credit, and disclosure of key terms and conditions— tection for consumers across all types of providers, consis- should apply to digital credit. However, design elements tency of approach, and a level playing field in the market. will need careful adaptation. For example, established Achieving comprehensive coverage may require address- font sizes for KFSs will need to be adapted to work on ing regulatory gaps. mobile phones. Adapted approaches for conveying key For example, see Mobile Privacy Disclosures. 38.  For more details, see Mazer and McKee, “Consumer Protection in 39.  Review of DFS User Agreements in Africa. 36.  Digital Credit.” Mazer and McKee, “Consumer Protection in Digital Credit.” 37.  Facilitating Digital Financial Services Disclosure. 40.  Technical Note on Developing a Key Facts Statement for Consumer Credit   19 8. L  EGAL MANDATE, SUPERVISION, of the respective authority in a proportional, timely, and consistent manner. Action plans for corrective measures AND ENFORCEMENT may also be agreed upon with the financial service pro- vider, and its implementation should be monitored by Formal regulation requiring KFSs is the preferred supervisors.42 approach, as regulation would provide greater legal weight and allow for formal enforcement. Depending on country context, policy makers may need to clarify whether a legal authority exists to issue such a regulation. Where CONSUMER TESTING, WORKING 9.  legal mandate is an obstacle, alternative short-term WITH INDUSTRY, AND RAISING approaches could include voluntary guidelines on KFSs. CONSUMER AWARENESS However, over the long term, the legal mandate for a financial sector authority to require the provision of KFSs Consumer testing of a draft KFS should be undertaken to (as well as to establish broader disclosure and financial test what content and format most effectively conveys key consumer protection rules) should be clearly enumerated. information to consumers. Consumer testing is critical to ensuring the effectiveness of KFSs in achieving policy Strong and consistent supervision, monitoring, and objectives, particularly in a specific country context where enforcement of KFS requirements will be necessary. consumers may be confused about particular issues or Supervisors will require training for new rules on KFSs, and react differently to design elements according to local examination manuals may require revision. In general, social and cultural norms. The clear international guid- financial sector authorities will need to have a range of ance is that designing an effective KFS requires iterations supervisory and enforcement powers to monitor and of testing and refinement. Testing can consist of small ensure compliance with financial consumer protection focus groups, cognitive interviews, or broader consumer rules. A mix of supervisory tools and techniques should be surveys. Consumer testing can be used to test different used to check financial service providers’ compliance with versions of a KFS and compare levels of comprehension, new disclosure requirements. as well as consumers’ decision-making processes based on the KFSs. This type of testing can provide the opportu- New rules on KFSs can be monitored through both tradi- nity to learn what information consumers typically focus tional supervisory tools (for example, on-site and off-site on, how much information they can comprehend and pro- examinations) and new supervisory tools (for example, cess, and how their behavior is altered by different designs mystery shopping). On-site examinations can be used to and different information. check for signed copies of KFSs, examine training proto- cols for sales staff and ensure sufficient levels of training, Compliance costs are frequently raised by providers as an and review internal audit reports on compliance with obstacle to disclosure rules. For less sophisticated finan- rules. Off-site examinations can be used to verify the cial providers serving low-income consumers, there is a accuracy of generic KFSs obtained from branches or risk that compliance costs may discourage responsible websites, verify the accuracy of APR and total cost of providers from serving this market and limit financial credit calculations, and monitor complaints with respect access. Any regulation should therefore strike a careful to KFSs (or broader issues with disclosure and transpar- balance between costs and benefits and not require ency). Resources permitting, mystery shopping can be superfluous items that impose additional compliance utilized to test interactions with provider staff and see costs and do not benefit consumers. The main cost com- how and when KFSs are presented to potential borrow- ponents for providers include changes to management ers. Mystery-shopping techniques can be particularly and information systems (particularly with respect to the useful for monitoring compliance with rules on oral com- calculation of total cost of credit and APR), changes to munication and sales practices.41 written materials, and training of staff. These can generally be viewed as one-time expenses; recurring costs may Enforcement action should be applied when non-compli- therefore be much lower. ance and misconduct are identified. Enforcement tools (for example, suspension or withdrawal of products/ser- Working with industry associations and providers will be vices, fines, compensation to consumers) should be important for the ultimate success of rolling out a KFS for applied according to the issues identified and the powers For example, see Mazer, Gine, and Martinez, Mystery Shopping 41.  For more information, see Good Practices for Financial Consumer 42.  for Financial Services. Protection, A5 (“Enforcement”) in Deposit and Credit Products and Services Chapter. 20   Technical Note on Developing a Key Facts Statement for Consumer Credit consumer credit. The success of the disclosure regime in Special consideration may need to be given to the imple- Peru is partly attributed to the Superintendency of Bank- mentation of KFSs by NBFIs. Differing levels of capacity ing, Insurance, and Private Pension Funds Administrators’ among financial providers should be taken into consider- extensive efforts to work with stakeholders throughout the ation. For example, smaller MFIs and less formal financial development phase—discussing disclosure rules, address- cooperatives may find it difficult to calculate APR. Certain ing concerns about compliance costs, and working with NBFIs may require special training, educational materials, financial providers to increase familiarity with formulas for or software to help implement KFS requirements. calculating effective interest rate. When discussing KFS and related disclosure rules with industry, it should be Consumer awareness campaigns should be undertaken emphasized that such requirements have strong benefits to publicize the final draft of a new KFS. Particularly in for responsible providers by creating a level playing field countries with low levels of financial literacy, efforts will and allowing for more transparent competition among be necessary to raise consumer awareness of what total providers. cost of credit and APR represent, how they relate to one another, and how they should be used (both their useful- There should be an appropriate transition period for the ness and their inherent limitations), as well as to familiar- industry once new regulation on KFSs has been passed. ize consumers with the format and content of the KFS All providers should be given adequate time to adapt and how and when such a statement should be made their internal processes to calculate total cost of credit and accessible to them. These efforts will likely require coor- APR, prepare KFSs, and train staff appropriately in their dination among various government agencies and con- delivery. sumer and industry associations. In Peru, consumer awareness campaigns were developed with consumer associations. ANNEXES ANNEX A ILLUSTRATIVE KEY FACTS STATEMENT FOR CONSUMER CREDIT KEY FACTS STATEMENT FOR CONSUMER CREDIT * Review carefully before agreeing to a loan.* SECTION I: KEY TERMS LOAN SUMMARY COST OF CREDIT REPAYMENT SCHEDULE 1. Amount of Loan CUR______ 4. Interest CUR _________ 7. Date First ___ /___ /___ Amount you Interest you will be Payment Due are borrowing charged on the loan 8. Number of ___________ Payments 2. Duration of Loan ___________ 5. Other Fees and CUR_________ 9. Payment ___________ Agreement Charges Frequency See details in Section III 3. Amount Received CUR______ Annual 6. 7. Total Cost of Credit 10. Amount Per CUR_________ Amount you actually Percentage Rate All costs for the Payment receive from the Total Cost of Credit loan, including Includes capital, lender as a comparable interest and fees interest, and annual percentage CUR_________ recurring fees ________% Amount of Loan 1. Total Cost of Credit 7. TOTAL AMOUNT YOU PAY 11.  + = Amount you are All costs for the loan, Total amount you pay after borrowing including interest and fees making all payments CUR_________ CUR_________ CUR_________ This loan: 7.41% APR Avg. best High cost zone APR 6.50% 7.00% 7.50% 8.00% ... 12.00% SECTION II: YOUR RIGHTS AND OBLIGATIONS 3  Any questions or complaints? Call [TELEPHONE], email [EMAIL ADDRESS], or write to [MAILING ADDRESS] to contact us regarding your question or complaint. 3  Unsatisfied with our response to your question or complaint? Contact the [EXTERNAL DISPUTE RESOLUTION BODY] for help at [TELEPHONE] or [EMAIL], write to [ADDRESS], or visit [WEBSITE]. 3  Want to pay off your loan early? You can do so without any penalties or fees. 3  You may cancel the loan agreement within a period of [XX] calendar days after signing the agreement. * This information is not final until signed by all parties, and does not replace the loan agreement. You have the right to a copy of the full loan agreement. * * This information is valid for [TIME PERIOD]. * 22 Technical Note on Developing a Key Facts Statement for Consumer Credit   23 SECTION III: UPFRONT AND RECURRING FEES UPFRONT FEES UPFRONT FEES RECURRING FEES Arrangement fee o  CUR________ Collateral appraisal o  CUR _________ Credit life insurance o  CUR________ per ________ Documentation fee o  CUR________ Credit history check o  CUR_________ Management fee o  CUR________ per ________ Other fees (list all) o CUR_________ _______________________________________ TOTAL UPFRONT AND _______________________________________ RECURRING FEES AND CHARGES (EXCLUDING INTEREST) CUR__________ _______________________________________ _______________________________________ SECTION IV: IMPORTANT TERMS AND CONDITIONS TO CONSIDER LATE PAYMENT PENALTIES TERMS AND CONDITIONS TERMS AND CONDITIONS o  Late fees if payment CUR________ o  Cash deposit/ CUR _________ o  Variable interest CUR________ is more than _________ mandatory savings: rate applies days late o  Default interest if ________% per o  COLLATERAL: You are committing the o  Other payment is more than following as collateral: _____________________________________ _________ days late _____________ _________________________________________ _____________________________________ _________________________________________ _____________________________________ _________________________________________ _____________________________________ * Late or missing payments may have severe consequences on your collateral and your credit history, hurting your ability to reborrow. * CERTIFIED CORRECT: I ACKNOWLEDGE RECEIPT OF THIS I ACKNOWLEDGE RECEIPT OF THIS STATEMENT PRIOR TO SIGNING THE STATEMENT PRIOR TO SIGNING THE LOAN AGREEMENT: THE GUARANTEE: _____________________________________ _____________________________________ _____________________________________ Credit provider representative Borrower Guarantor (if applicable) Name of Borrower: Application No: Date prepared: Note: This KFS is a generic illustration only, provided to help the reader visualize elements discussed in this technical note. The APR graphic from the preceding page is from Hogarth and Merry, “Designing Disclosures.” See source for descriptions of “Avg. Best APR” and “high cost zone.” ANNEX B EXAMPLES OF KEY FACTS STATEMENTS GHANA: Pre-Agreement Truth in Lending Disclosure Statement for Credit Products and Services 24 Technical Note on Developing a Key Facts Statement for Consumer Credit   25 MALAYSIA: Product Disclosure Sheet for Personal Loans 26   Technical Note on Developing a Key Facts Statement for Consumer Credit MALAYSIA: Product Disclosure Sheet for Personal Loans Technical Note on Developing a Key Facts Statement for Consumer Credit   27 PHILIPPINES: Format of Disclosure Statement on Small Business/Retail/Consumer Credit 28   Technical Note on Developing a Key Facts Statement for Consumer Credit PHILIPPINES: Format of Disclosure Statement on Small Business/Retail/Consumer Credit Technical Note on Developing a Key Facts Statement for Consumer Credit   29 SOUTH AFRICA: Pre-Agreement Statement & Quotation for Small Credit Agreements 30   Technical Note on Developing a Key Facts Statement for Consumer Credit UNITED KINGDOM: Pre-Contract Credit Information Technical Note on Developing a Key Facts Statement for Consumer Credit   31 UNITED KINGDOM: Pre-Contract Credit Information 32   Technical Note on Developing a Key Facts Statement for Consumer Credit UNITED KINGDOM: Pre-Contract Credit Information Technical Note on Developing a Key Facts Statement for Consumer Credit   33 UNITED KINGDOM: Pre-Contract Credit Information 34   Technical Note on Developing a Key Facts Statement for Consumer Credit UNITED KINGDOM: Pre-Contract Credit Information REFERENCES “Annual Percentage Rate of Charge Calculator,” European Commission, https://ec.europa.eu/ info/publications/annual-percentage-rate-charge-calculator_en. 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Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on Credit Agreements for Consumers Relating to Residential Immovable Property and Amend- ing Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 Text with EEA Relevance (European Parliament, Council of the European Union, 2014), http://eur-lex. europa.eu/eli/dir/2014/17/oj. 35 36   Technical Note on Developing a Key Facts Statement for Consumer Credit Disclosure and Product Transparency Rules for Credit Products and Services (Bank of Ghana, February 2017), https://www.bog.gov.gh/privatecontent/Public_Notices/Fin%20Stability/DISCLOSURE%20 ON%20CREDIT%20PRODUCTS%20FINAL%2020%20Feb%202017.pdf. “Effective Approaches to Support the Implementation of the G20 High-Level Principles on Financial Consumer Protection: Action Plan of the G20/OECD Task Force on Financial Consumer Protec- tion” (Organisation for Economic Co-operation and Development, 2012) , https://www.oecd. org/daf/fin/financial-education/G20-OECD-Financial-Consumer-Protection-Principles-Implemen- tation-2014.pdf?TSPD_101_R0=6837f02a31bc8eb38590e4a67d57560fynU00000000000000003b- b267aeffff00000000000000000000000000005a9714be00c2c95d03. Facilitating Digital Financial Services Disclosure, Regulatory Guide 221 (Australian Securities and Investments Commission, 2016), http://download.asic.gov.au/media/3798806/rg221-published- 24-march-2016.pdf. “Financial Inclusion and Consumer Protection in Peru: The Branchless Banking Business” (Superinten- dence of Banks, Insurance and AFPs/Consultative Group to Assist the Poor, 2010), https://www. cgap.org/sites/default/files/CGAP-Financial-Inclusion-and-Consumer-Protection-in-Peru-Feb-2010. pdf. “G20 High-Level Principles on Financial Consumer Protection” (Organisation for Economic Co- operation and Development, 2011), https://www.oecd.org/g20/topics/financial-sector-reform/ 48892010.pdf?TSPD_101_R0=11bd58096a96b746d3cf2be765d2b9eeiy100000000000000003b- b267aeffff00000000000000000000000000005a97157f0058a300e3. Xavier Giné, Cristina Martínez Cuellar, and Rafael Keenan Mazer, “Information Disclosure and Demand Elasticity of Financial Products: Evidence from a Multi-Country Study,” Policy Research Working Paper No. 8210 (World Bank Group, October 2017), http://documents.worldbank.org/curated/ en/513631507130361973/pdf/WPS8210.pdf. Global Financial Inclusion and Consumer Protection Survey: 2017 Report (Washington, DC: World Bank Group, December 2017), https://openknowledge.worldbank.org/bitstream/handle/10986/ 28998/122058.pdf?sequence=2&isAllowed=y. Good Practices for Financial Consumer Protection: 2017 Edition (Washington, DC: World Bank Group, 2017), https://openknowledge.worldbank.org/bitstream/handle/10986/28996/122011- PUBLIC-GoodPractices-WebFinal.pdf?sequence=1&isAllowed=y. “Guidelines on Product Transparency and Disclosure,” BNM/RH/GL 000-3 (Bank Negara Malaysia, 2010), https://islamicbankers.files.wordpress.com/2013/12/20130401-guidelines-on-product- transparency-and-disclosure.pdf. Jeanne M. Hogarth and Ellen A. Merry, “Designing Disclosures to Inform Consumer Financial Deci- sionmaking: Lessons Learned from Consumer Testing,” Federal Reserve Bulletin 97, no. 3 (August 2011), https://www.federalreserve.gov/pubs/bulletin/2011/pdf/designingdisclosures2011.pdf. Lauren E. Jones, Cäzilia Loibl, and Sharon Tennyson, “Effects of Informational Nudges on Consumer Debt Repayment Behaviors,” Journal of Economic Psychology 51 (December 2015), 16–33. Manual of Regulations for Banks, Volume 2 (Bangko Sentral ng Pilipinas, 2016), http://www.bsp.gov. ph/downloads/Regulations/MORB/2016MORB2.pdf. Rafe Mazer, Xavier Gine, and Cristina Martinez, Mystery Shopping for Financial Services: What Do Providers Tell, and Not Tell, Customers about Financial Products? A Technical Guide (Washington, DC: Consultative Group to Assist the Poor, 2015), http://www.cgap.org/sites/default/files/ Technical-Guide-Mystery-Shopping-for-Financial-Services-Oct-2015.pdf. Rafe Mazer and Kate McKee, “Consumer Protection in Digital Credit,” Focus Note 108 (Consultative Group to Assist the Poor, August 2017), http://www.cgap.org/sites/default/files/Focus-Note- Consumer-Protection-in-digital-Credit-Aug-2017.pdf. Mobile Privacy Disclosures: Building Trust through Transparency, FTC Staff Report (Federal Trade Commission, February 2013), https://www.ftc.gov/os/2013/02/130201mobileprivacyreport.pdf. Procedure, Terms, Forms and the Minimum Requirements for Communication between Bank and Depositor, Creditor and Consumer, Regulation 8/05 (Central Bank of the Republic of Armenia, 2009), https://www.cba.am/EN/laregulations/Regulation%208_05_eng.pdf. Technical Note on Developing a Key Facts Statement for Consumer Credit   37 Regulations Made in Terms of the National Credit Act, 2005 (Act No 34 of 2005), Department of Trade and Industry, Republic of South Africa, http://www.ncr.org.za/pdfs/The%20National %20Credit%20Regulations.pdf. “Removal of Interest Rate Caps and Consumer Protection Measures,” CB Circular No. 19/2015 (Bank of Zambia, 2015), http://www.boz.zm/Circular2015-19RemovalofInterestRateCapsand ConsumerProtectionMeasures.pdf. Review of DFS User Agreements in Africa: A Consumer Protection Perspective (ITU-T Focus Group Digital Financial Services, International Telecommunication Union, January 2017), https://www. itu.int/en/ITU-T/focusgroups/dfs/Documents/01_2017/ITU_FGDFS_Report-on-Review-of-DFS- User-Agreements-in-Africa.pdf. SEC Memorandum Circular No. 7 (Securities and Exchange Commission, Republic of the Philippines, September 2011), http://www.sec.gov.ph/wp-content/uploads/2015/11/sec-memo-no.-7s2011. pdf. Akhand Tiwari, Anvesha Khandelwal, and Minakshi Ramji, “How Do Microfinance Clients Understand Their Loans?” (Center for Micro Finance, 2008), https://www.microfinancegateway.org/library/ how-do-microfinance-clients-understand-their-loans. “Updated Rules Implementing the Truth in Lending Act to Enhance Loan Transaction Transparency,” Circular No. 730 (Bangko Sentral ng Pilipinas, July 2011), http://www.bsp.gov.ph/downloads/ regulations/attachments/2011/c730.pdf. Annex II: Examples of Key Facts Statements   39