But if that is the link, I don't find it compelling. Anyway, the thought leads me to a larger question: do annualized percentage rates (APRs) always increase transparency? MFTransparency.org emphasizes the importance of computing APR equivalents of all charges. When I was researching whether to refinance my home in April, all the lenders listed headline rates as well as APRs. The APRs were always higher because they factored in various fees. I assume a transparency law made them do this. The APRs let me compare apples to apples, so I'm glad for the practice.
At the same time, APRs seem overrated in some contexts. In the early 20th century, Morris Plan banks made small loans to working Americans who could muster two cosigners to assume joint liability not unlike in group microcredit today (see chapter 3). If you took a $100 loan, the bank took 8% right off the top and gave you the rest, $92. Then you paid back $100 in small regular installments over the following year. Superficially the interest rate seemed to be 8%. But critics pointed out that the balance on the loan started at $92 and fell to 0 over the year, so it averaged $92/2=$46; and $8 interest on $46 worked out to a much higher 8/46=17% APR. The same point can be made about many microloans today. But in a panel discussion at the annual meeting of the American Economics Association in 1931, surrounded by economists who think this way, one Ralph Pitman, who served as president of the Morris Plan Bankers Association, mounted a passionate defense of Morris lending practices:
In other words: "Regular folks don't know from APRs. We make our deal simple and clear, and in a way that fits with how people think about money: you get $92 for a special need, you pay back $2/week out of your regular cash flow. We are transparent."
Consider also the example of the vegetable sellers of Chennai, who pay 10%/day for informal credit. Are their moneylenders remiss in not disclosing the effective APR of 128,330,558,031,335,170%/year? I'm reminded of the Steven Wright joke: “One time, the police stopped me for speeding, and they said, ‘Don't you know the speed limit is 55 miles an hour?’ I said, ‘Yeah, I know, but I wasn't gonna be out that long.’”
APRs are one good route to transparency in many contexts. But to answer my own question, sometimes APRs are not enlightening or necessary.