Tax advisor: Legal Analysis of Revolving Cards: The Judgment of the Supreme Court
The judgment of the Supreme Court (No. 1492/2023, October 27) reexamines revolving credit cards, assessing the usurious nature of the interest rate. It emphasizes that exceptional circumstances justifying an interest rate higher than the normal should be considered when granting financing or modifying the interest rate. The case involved a revolving credit card contract with three different interest rates. The customer sued for nullity, arguing that the 28.32% APR was usurious.
First Instance Ruling:
The first-instance judgment favored the plaintiff, declaring the nullity of the contract and ordering reimbursement.
Appeal and Arguments:
In the appeal, the court overturned the previous decision and, in accordance with the established jurisprudence in the Supreme Court judgment No. 1492/2023, dated October 27, ruled that:
Determining credit as usurious implies that the interest is considerably higher than normal, without the presence of exceptional circumstances justifying it. In the field of consumer credit operations, these circumstances must be evaluated in relation to the specific quality or purpose of the financing. In this case, the financing through the plaintiff’s credit card involves special risk circumstances, such as recurring charges to finance online games or bets, previously unknown to the lending institution, thus justifying an interest higher than the standard.
Impugnation and Summary by the Supreme Court:
However, the decision of the higher instance has been contested on appeal, alleging as a reason the violation of Article 1.1 of the Law of July 23, 1908, on the nullity of usurious loan contracts, arguing that the interest on the card is not considered manifestly disproportionate to the circumstances of the case.
In this regard, the Supreme Court summarizes the reason as follows:
The conditions are met to categorize the credit as usurious since the set interest is significantly higher than the normal interest rate. Additionally, it has not been demonstrated that the lender considered the existence of exceptional circumstances to establish such a high interest rate.
Key Points of Jurisprudence:
The presented argument is accepted, and in this regard, the analyzed judgment reaffirms the doctrine established in Supreme Court judgment No. 258/2023, dated February 15, which can be summarized in the following points:
To determine the usurious nature of the remunerative interest on a revolving credit card, the assessment must be based on the APR.
The relevant comparison should be made with the average interest applied to credit operations through revolving credit cards.
Statistics from the Bank of Spain, breaking down a specific section for revolving credits in contracts after June 2010, must be taken into account.
Although the Bank of Spain examines the TEDR (restricted definition effective rate) in statistical bulletins, not the APR, this is not decisive in establishing usurious nature since the interest must be “significantly” higher.
The judgment specifies a criterion for revolving credit cards: the difference between the contractual APR and the average reference rate should not exceed 6 percentage points, or otherwise, the interest rate would be considered usurious.
The existence of exceptional circumstances could justify exceeding the above limit without the interest being considered usurious.
Supreme Court Decision:
Given the aforementioned jurisprudence, the resolution issued by the Supreme Court can be summarized as follows:
The APR of 28.27% for the defendant’s card is considered significantly higher than the average market interest. The 7 percentage point difference exceeds the limit established by jurisprudence to avoid being deemed usurious. The lack of demonstration or allegation of exceptional circumstances in granting the financing reinforces the conclusion that the interest is unjustifiably high.
While the use of the card for risky operations could have contractual implications, the judgment emphasizes that this circumstance does not justify an interest significantly higher than the average in operations of the same category. Ultimately, the Supreme Court’s decision confirms the nullity of the contract, supported by the Usury Repression Law, due to the conspicuous disparity between the established interest and the market standard, without the proper consideration of exceptional circumstances in granting the financing.
In summary, the Supreme Court’s judgment reiterates the importance of evaluating exceptional circumstances when setting interest rates, confirming the nullity of the contract due to the conspicuous disparity between the established interest and the market standard.
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