The Financial Conduct Authority is seeking views on whether annual percentage rates remain the best way to help consumers understand the cost of borrowing.
The regulator said its review would consider whether changes are needed to the way borrowing costs are communicated in credit advertising.
Annual percentage rates show the yearly cost of borrowing, including interest and fees. Under current rules, representative APRs are required in most credit advertising, with at least half of consumers expected to receive that rate or better.
Research published by the FCA found that APRs can help consumers compare products, but that other information, such as total repayment figures, can also improve understanding. However, the regulator said tailoring different information to different products could sometimes make comparison harder and create confusion.
The research found that, when shown APR alone, 80% of people correctly identified the cheapest product where the lower APR also meant a lower repayment. Fewer than one in five did so when the lower APR did not mean cheaper borrowing.
The FCA has also published proposals to simplify parts of the Consumer Credit rule book on credit advertising. The changes are intended to remove duplication and outdated requirements where the Consumer Duty already places expectations on firms to support consumer understanding.
Alison Walters, director of consumer finance at the FCA, said: “Clear information advertising credit helps people shop around. But there’s evidence that APRs do not always allow people to understand the true cost of credit. To help people navigate their financial lives, we’re asking for views on whether there’s a better way.”
The discussion paper has been published alongside a consultation paper on removing some prescriptive requirements. Both papers focus on whether more flexible ways of presenting loan costs could help borrowers make better informed decisions.
The discussion and consultation paper closes on 17 June 2026.
Paul Matthews, senior risk director at Broadstone, said: “APRs have long been the cornerstone of credit advertising, but the regulator’s research reinforces a well-known challenge – they are not always a reliable proxy for the true cost of borrowing, particularly where product structures differ.
“The FCA’s willingness to revisit how borrowing costs are communicated is therefore welcome, especially at a time when affordability will be critical to a well-functioning credit market. There is a strong case for complementing APRs with clearer, more tangible measures such as total repayment or pounds-and-pence cost, provided this is done in a consistent way that preserves comparability.
“Consumers tend to focus on monthly repayments and overall cost, so aligning disclosures with these behaviours will be key to improving outcomes. Under the Consumer Duty, firms are already expected to ensure communications are understandable and support good outcomes, so any simplification of the rulebook should focus on reducing duplication while maintaining robust standards.
“The priority should be a balanced approach that improves consumer understanding without introducing unnecessary complexity. Any move towards more flexible disclosures will need careful calibration to avoid inconsistent approaches across the market, which could ultimately undermine comparability.”
