Are we just too stupid to understand?

As a reward for being faithful about my mortgage and credit card payments, I receive a continual ration of offers to participate in different programs designed to lower my interest, lower my payments, and lower my overall level of debt. The most notable of these programs (at the present time) is the Debt-Free Plan administered by MBNA.

The Debt-Free Plan offers five different loan amounts from $5,000 to $25,000 (in $5,000 increments) with a set payment schedule (X amount per month for Y months). Each of these loan amounts is listed on the mailer showing the required monthly payment for contract lengths of 72, 60, 48, or 36 months based on 6.99% Variable APR assuming rates do not change. APR increases and additional advances will lengthen term or increase payments.

One of the samples is:

Borrow $15,000.
Monthly payment is $266 for 72 months.

Basic scrutiny yields the following:

Total amount paid back is $19,152.
Total interest paid is $4,152.
Portion of monthly payment going to interest is $57.67
Percent of monthly payment going to interest is 22%

How in the hell can this be based on 6.99% APR?

By working through each of the separate loan structures (17 in all), I came up with a value that reflected the percent of monthly payment going to interest from a low of 13.3% to a high of 22% (the sample shown).

The scary part of all this is the up front statement that your APR is not guaranteed for any period of time and may be changed by MBNA as well as adjusted on a monthly basis due to changes to the Prime Rate. You will need to make extra payments or larger payments if the APR increases.

Why in the world would anyone choose to sign up for a game where the rules can be changed simply at the whim of the opposing team? And how is it legal for a loan structure to be advertised at 6.99% when the pay back reality requires a minimum of 13.3%?

I have a feeling that it all boils down to the notion of overhead and administrative (lobbying) costs being passed on to the consumer.