The Supreme Court has given air to the bank in the face of the “mass litigation” generated by one of the riskiest financial products that consumers can subscribe to: cards revolving that automatically defer payments. In a ruling on February 15, the plenary session of the Civil Chamber determined that there can only be usury —and, therefore, grounds for nullity— if the agreed interest is six points higher than the average market rate. In the last decade, the average rate has been around 20%, according to data from the Bank of Spain.
The Supreme Court considers the revolving card contracts with disproportionate interest to be usury
Consumer associations have spent years warning of the dangers of these cards, which proliferate at times of increased spending such as vacation periods and also in response to the rise in the cost of living or economic hardships. Its potential clients are people who already have other debts and to whom the entities do not offer them traditional consumer credits, which have lower interests.
Their main characteristic is that they can be used even if there is no money in the account because the payment of the purchases –and even the withdrawal of cash– is automatically deferred and the credit is granted again as the debt is paid off. The collection is made in monthly installments that generate very high interest. Sometimes, these installments to pay are so small that they do not even cover the interest generated to date, which increases the debt and generates, in turn, new interest.
To what extent the agreed interest rate can be considered usurious or not is what the Supreme Court has tried to determine in various rulings since 2015. This latest resolution definitively tilts the doctrine in favor of the bank by giving a margin of up to six points over the average price of these credits to consider them usurious. In their resolution, the judges affirm that in the face of the “thousands of disputes” on this issue it is pertinent “to give equal or equivalent treatment to equal or equivalent situations” to “provide greater legal certainty to the market and economic traffic.”
Provincial courts had been issuing contradictory resolutions regarding what interest rate is considered “significantly higher than normal money and manifestly disproportionate”, which are the requirements provided for in the law against usury. This rule, which dates back to 1908, provides that in cases of nullity of contracts, the client must only return the amount received to the bank and not the interest. Under this regulation, thousands of clients have sued banks in recent years.
Most of the territorial courts, however, had opted for lower limits than those now set by the Supreme Court. For example, the Court of Madrid, where the majority of banks are based, has been considering usurious interest that exceeded the normal rate of money by 3.7 points. His argument is that it was based on an “already very high” price of money, so an additional difference of 3.7 points was equivalent to a significant increase.
In their resolution, the Supreme Court judges limited themselves to explaining that they have taken the aforementioned six points as an “admissible margin” taking into account a previous ruling of March 2020 that declared a contract with an APR of 26.82% usurious when the type The reference average was slightly higher than 20% per year. The room then considered that this was an “appreciable difference” and it is the figure that is now taken as a reference.
Manuel Jesús Marín López, professor of Civil Law at the University of Castilla-La Mancha, acknowledges that “it is still an arbitrary figure”, although he considers it “very positive” that the Supreme Court has finally defined what type of interest should be considered “Notably higher than normal for money.” “It is good that there is a clear rule. The previous situation created a lot of legal uncertainty because the law used an indeterminate concept. Now the lawyers are going to know if their resources have a chance of succeeding or not and enormous litigation is going to be avoided”, he maintains.
“It could have been six points, ten or five. It is a quite arbitrary limitation because the Supreme does not justify why he has established that limit. It seems that the only intention is to put an end to the ‘massive litigation’ to which they allude in the sentence”, says, for her part, the lawyer Almudena Velázquez, corporate legal director of the firm in99. This lawyer considers that the six-point limit “represents an important restriction to the defense of those affected by this type of credit.” In her opinion, from now on there are “few situations” that will qualify as usury with this parameter.
The legal imbroglio of the revolving dates back to 2015. In November of that year, the Civil Chamber issued a first judgment in which one of these cards was declared invalid because the interest rate was more than double the average interest rate for consumer loans when the agreement was signed. contract. The interest rates of consumer loans are significantly lower than those of cards and are around 7%. In practice, this meant considering usurious interest rates above 14%, which led to an avalanche of resources.
Years later, in March 2020, the Supreme Court changed the criteria and clarified that the specific statistical category of the revolving, whose interest rates are usually around 20%. The Bank of Spain did not publish a specific section for these cards until 2017, when it began to offer the relevant information from June 2010. In May 2022 the court reiterated this doctrine: it ruled that a card with an APR of 24.5 % was not usurious considering that it was “usual” for cards of this type contracted with large banking entities to exceed 23%, 24%, 25% and up to 26% per year.
Barely five months later, last October, the High Court resolved which comparison parameter should be taken into account in contracts prior to June 2010. That is, those signed before the banking supervisor published its specific section on the revolving. The judges then agreed that, in the absence of a particular breakdown in the statistical bulletins of the Bank of Spain, they should go to “the closest specific information in time.” That is, the one that was offered in 2010.
These resolutions have not prevented, however, that lower courts have made contradictory decisions using a stricter threshold than the one outlined by the Supreme Court. The lawyer Almudena Velázquez believes that the latest sentence of the High Court practically closes that path because it is to be expected that practically all of the courts of first instance and of the provincial hearings will follow the new jurisprudence. “The Supreme Court had already been tightening the doctrine that it established in the March 2020 sentence and with this decision it almost definitively underpins the defense of those affected by usury,” she maintains.
The difference between TAE and TEDR
However, the sources consulted believe that the Supreme Court ruling does not resolve another front that has been at the center of “mass litigation” in recent years: the rate used to calculate its cost. The sentence reiterates that the index that must be taken into consideration to determine if the agreed interest is notably higher than the average is the equivalent annual rate (TAE). This rate measures the interest rate taking into account the nominal rate, but also other expenses and commissions. In other words, it allows you to see more closely what the customer is going to end up paying for.
The problem is that the Bank of Spain offers another rate in its statistical bulletin: the TEDR (restricted definition effective rate), which does not include related expenses such as premiums for amortization insurance and commissions. It is, therefore, lower than the APR. The banking supervisor himself warns that the purpose of the TEDR rates “is basically to provide the Eurosystem with relevant information for the analysis of the transmission of monetary policy but they are not, unlike the APR rates, an adequate or comparable reference of the total cost for the clients of the financing granted”.
Despite this, the Supreme Court defends that “you can continue to go to the statistical bulletin of the Bank of Spain” and that this index “be complemented with what would correspond in view of the commissions generally applied by financial institutions.” The judges believe that, for the purposes of prosecution, the difference between what both rates mark “will not be very decisive” because “usury requires not only that the agreed interest be higher than the common market, but that it be significantly so.”
“The use of this adverb in the comparison minimizes in most cases the relevance of the difference between the TEDR and the TAE”, says the ruling. However, the sources consulted argue that since there are no specific official statistics on APRs, the parties should look for other comparison formulas. “Yes, it is relevant. The circumstance may arise that for a few tenths an assumption may or may not be considered usury”, says the lawyer Velázquez.
From the Association of Financial Users (Asufin) they also affirm that the APRs that banks communicate on many occasions are not real. “Many times associated expenses such as insurance are not calculated,” says a spokesperson. In fact, this organization annually produces a barometer with data on the conditions of the cards revolving most relevant. According to the latest study, from December 2022, the APR of the cards revolving the upward path that began in 2021 continues, rising to 21.15%, 0.98% more than the 20.17% of the previous year.
In this organization they consider that “in the commercialization of revolving there is a complete lack of transparency, since compound interest is not explained [el que resulta de sumarlo al capital inicial y sobre esta cuantía se van generando nuevos intereses] and its impact on the economic burden of the contract, as well as the time it will take to pay off the debt”. And that, therefore, there is still room to, in certain cases, claim the nullity of these contracts in this way.