The Bank of Mexico said Monday it was implementing a series of changes effective Oct. 26 that would make the calculation of the annual percentage rate (APR) on loans more exact and clear, spurring greater competition in lending.

The objective is to “specify, clarify and simplify the methodology for calculating” the APR on loans, as well as the factors that financial companies use in determining and disclosing the total cost of loans, the central bank said in a statement.

Among the rules being implemented is one that requires lenders on automobile loans to include the cost of mandatory collision insurance in the calculation of the APR.

Cash deposits that borrowers are required to provide, as well as commissions charged for securing preferential rates, must be included in the APR’s calculation.

The rules also cover how commissions, insurance premiums and other costs are calculated in the APR, and they list the different factors that must be accounted for in APR calculations, the Bank of Mexico said.

The rules update and change regulations adopted in 2009 in an effort to make the APR “a tool for information and comparisons that can be used by public users of loans made by financial and business entities, as well as increasing efficiency,” the Bank of Mexico said. EFE