חוק אשראי הוגן: חישוב שיעור עלות ממשית של אשראי

The Fair Credit Law limits the interest rate that a lender may charge a borrower using the legal term "Effective Cost of Credit." The law does not define how the Effective Cost of Credit of a loan is to be calculated. Although the law grants an authority to the Justice Minister to issue regulations, no regulations concerning this calculation method have been issued. This question became more important recently, as the the law's limitations were also applied to banks. The calculation undertaken in one Supreme Court case from 1977 contradicts fundamental economic principles, and ignores the time value of money. This Article argues that the Effective Cost of Credit should be calculated using the Internal Rate of Return formula. Using the Internal Rate of Return formula advances the purpose of the Fair Credit Law, which is to protect borrowers, because this formula accurately reflects the cost of loans to borrowers. The Internal rate of Return formula also fits well with the formal definition of the Effective Cost of Credit in the law. Other countries have adopted the Internal Rate of return formula in similar contexts. A Canadian law determining the maximum interest rate that one can charge on a loan uses the Internal Rate of Return to determine which loans meet the conditions of the law. A European Union directive concerning the calculation of the annual charge for loans also uses the Internal Rate of Return formula as the calculation method.