The representative example and the two-thirds rule

Every loan advertisement that states interest rates contains a representative example. It is the only figure legally tied to expected lending practice — and almost never the figure printed in large type.

What the rule requires

§ 17 (4) PAngV stipulates that the mandatory information in loan advertising must be illustrated with an example. When choosing this example, the advertiser must base it on an annual percentage rate at which it can expect at least two thirds of the contracts concluded as a result of the advertising to be made at that rate or a lower one. This ties the example to expected lending practice — unlike the “from” rate, which only describes the best creditworthiness tier and is not tied to any quota.

How to read both figures

The advertised “from” rate tells you what is possible in the best case. The representative example shows an APR that, as the advertiser expects, at least two thirds of customers will reach or beat. For realistic planning, the second figure is the relevant one. If the two are far apart, that is not a mistake in the advert but information: the terms vary widely, and your personal rating matters more than your choice of lender.

• “From” rate: best case, not tied to any quota
• Representative example: expected for at least two thirds
• A wide gap means strong dependence on creditworthiness
• The effective rate must be at least as prominent as any other interest rate

What else the advertising must state

§ 17 (2) PAngV requires, in a clear, unambiguous and prominent way, among other things the net loan amount, the borrowing rate with an indication of whether it is fixed or variable, details of all costs included and the annual percentage rate. The effective rate must be given at least as much prominence as any other interest rate. Under subsection 3, where applicable, the total amount payable, the term and the amount and number of instalments must also be stated. If any of these is missing from an advert that states interest rates, it tells you something about how carefully the lender handles mandatory information in general.