Judicial dispute between courts over revolving cards. The regional courts generally assume that that a rate of more than 20% with this type of product Financiers is usury. In doing so, they are squeezing the bank as they apply a stricter threshold than the one set by the Supreme Court in 2020 and ratified last year.
Revolving cards are one of the most controversial financial products in recent years because they have certain idiosyncrasies that are complex for some customers. The revolving modality allows deferral and splitting of purchase payments. However, instead of passing on the payment afterwards like with a traditional credit card, the payment is made in monthly installments that are generated interest, usually highwhich are around 20% and exceed them.
The High Court, in its most recent 2022 rulings, held that to decide whether a revolving credit is an occupier, the normal price of money (understood as equivalent annual interest, TAE) at the time the contract was signed must be checked. It also believed that for loans formalized between 1999 and 2009, the APR was common They ranged between 23% and 26% Therefore, the interest rates included in this range were not usurious.
From then on, provincial courts have solved cases by drip, but generally ignore the line marked by the Supreme Court. Some courts consider the TEDR instead of the TAE (effective interest rate constrained definition) and others the TIN (nominal interest rate) reflecting lower interest rates. Likewise, they generally estimate that a rate higher than 20% is exorbitant.
In this matter, the companies recently a Confirmation by the Bank of Spain. The regulator has clarified in the tables it publishes monthly on the interest rates applied by banks that the TEDR index does not reflect the actual cost to the customer. “The purpose of the TEDR rates is essentially to provide the Eurosystem with relevant information for analyzing the transmission of monetary policy, but unlike the TAE rates they are not an adequate or comparable reference of the total costs for granted financing customers.” , details of Bank of Spain.
In this sense, the banks’ defenses have celebrated this regulatory clarification, believing that judges will start to consider the TAE and this will increase the likelihood of judgments favorable to their interests. In fact, they point out that it would be most prudent for the Supreme Court to also refer to this new paragraph of the Banco de España in its future decisions, in order to dispel the doubts that have arisen in this regard, especially in the last two years .
Beyond the index to consider, there are other discrepancies in the sentences. Each provincial court uses a different criterion when determining what is “significantly higher than normal money and manifestly disproportionate” as the interest rate, which the Supreme Court is referring to to consider usury. For example, some courts consider a revolving credit excessive if it exceeds the average rate by 2 percentage points, others if it exceeds 4.5 percentage points, and still others if it exceeds 5 percentage points.
Both the courts and the corporations, lawyers and bank customers are pending a new statement from the colonel to establish case law and determine when an APR is disproportionate and may be considered usury. In fact, some judges claim that it is the legislature that sets clear criteria for usury, as is the case in some neighboring countries. The legal sources consulted are awaiting a quick ruling from the High Court. In Portugal it is currently a difference of 25% from the average rate; Denmark 35%; Germany higher than 12 points; Italy 25% plus 4 points; Sweden 40%.
This is a key decision for banks, as they have received an avalanche of lawsuits over the last few years over this issue. Statistics from the Bank of Spain show that revolving-related complaints have increased fivefold in recent years, from 204 in 2018 to 10,132 in 2021 (latest data available). According to the regulator, the bank has an outstanding balance of 11,400 million euros on revolving loans, which is why it faces multi-million dollar lawsuits in this case.
In fact, financial sources affected by the recent verdicts of the provincial courts assure that they will appeal the recent verdicts, which run counter to their interests.