What is the accuracy requirement for APR in open-end credit according to Reg Z?

The accuracy requirement for the Annual Percentage Rate (APR) in open-end credit, according to Regulation Z, is indeed that it must be within 1/8 of a percentage point of the actual APR. This standard is established to ensure that consumers receive clear and precise information regarding the cost of credit they are taking on, promoting transparency and allowing for better financial decision-making.

The rationale behind this specific threshold is to accommodate variations in calculations and ensure that borrowers can rely on the disclosed rates. A 1/8 of a percentage point accuracy standard strikes a balance between practical measurement limitations and the need for precise consumer information.

Understanding this standard assists lenders and consumers in complying with the disclosure requirements, fostering fair lending practices and protecting consumers from potential misinformation regarding credit costs.