Introduction
The Spanish Supreme Court’s ruling n.º 1492/2023, issued on October 27, 2023 (ECLI:ES:TS:2023:4549), has set a new precedent in the realm of revolving credit cards.
This decision not only echoes the principles outlined in the earlier Supreme Court ruling n.º 258/2023, dated February 15, 2023 (ECLI:ES:TS:2023:442), but also provides further clarity on evaluating usurious interest rates in credit agreements.
This blog aims to dissect this significant ruling, offering valuable insights for both financial institutions and consumers about the implications of this legal development.
Background of the Case
The case revolved around a client’s dispute with a bank regarding their revolving credit card agreement, which stipulated three different interest rates (29.32%, 28.32%, and 26.07%) based on the nature of the transaction.
The client contended that the applied interest rate of 28.32% APR was excessively high compared to the regular money rate, making it usurious.
In the initial ruling, the court sided with the client, deeming the contract void and requiring the bank to reimburse the amount exceeding the lent capital, plus the legal interest from the claim’s date and court costs.
However, this verdict was overturned in an appellate court, suggesting that for a credit to be considered usurious, the interest rate must be significantly higher than the normal money rate, barring exceptional circumstances that justify such a rate.
The Supreme Court’s Analysis
The Supreme Court’s deliberation highlighted several key points:
- The APR should be the benchmark in evaluating the usurious nature of interest rates in revolving credit agreements.
- A comparison needs to be drawn with the average interest rates applied in similar credit operations.
- The court referred to the Bank of Spain’s statistics post-June 2010, which provide detailed insights into revolving credit rates, focusing on the Effective Annual Interest Rate (EAIR), which slightly varies from the APR.
The Supreme Court observed that the contract’s APR was notably higher than the average, surpassing the threshold of a six percentage point differential, which is generally considered the upper limit for acceptable rates.
The Court further stated that any exceptional circumstances justifying a higher interest rate must be evident at the contract’s initiation or when modifying the interest rate, which was not demonstrated in this case.
Implications of the Ruling: This ruling is a watershed moment in Spanish jurisprudence regarding consumer credit. It underscores the need for financial institutions to meticulously assess and justify the interest rates they apply, especially in revolving credit scenarios.
For consumers, it serves as a reminder to be vigilant about the terms of credit agreements and to understand their rights under the law.
Conclusion and Call to Action
Spain’s Supreme Court has clearly defined the legal framework for assessing interest rates in revolving credit agreements, providing a balanced approach to protect consumer interests while allowing for legitimate credit operations.
If you are grappling with issues related to revolving credit card agreements or seeking to understand your legal rights and obligations, professional legal advice is crucial. We invite you to reach out to our experienced legal team for personalized assistance and expert guidance in navigating these complex legal waters.
Maria Luisa Castro
