Many of us have been approached by vendors outside hypermarkets or in shopping centres offering us credit cards that are easy to sign up for. So easy in fact that the small print often goes unnoticed.
As a result, tens of thousands of people in Spain have found themselves, victim of exorbitant interest on credit, that they are unable to pay off. The good news is, however, that under Spanish Supreme Court rulings consumers can claim back interest on revolving credit cards in Spain.
At Costaluz Lawyers we have years of experience defending consumers’ rights against banks. Claiming back interest on revolving credit cards is one of the actions we regularly undertake for our clients.
In this article, we outline what the current situation is and what you should do if you have been or are a victim of debt incurred through a revolving credit card.
What is a revolving credit card?
We’re all familiar with credit cards that offer us the chance to purchase something now and pay for later. We’re also well aware that credit cards allow you to pay off a percentage of your debt and settle the rest with added interest at a later date. However, not all credit cards charge a fair rate of interest.
The type is known as a ‘revolving credit card’ tends to charge much higher interest rates than regular credit cards.
Interest typically ranges between 20 and 30%, percentages that quickly lead to high levels of debt that are often difficult or impossible to pay off.
The type of interest incurred with revolving credit cards in Spain is stated on the contract, although often deep within the small print and not immediately obvious.
Vendors tend to ‘forget’ to mention the interest rate in their haste to capture you as a new client and cardholders neglect to find out what the rate is.
Did you know? Almost all banks have offered revolving credit cards, but the most common are those provided by Wizink and Carrefour.
Typical scenario for revolving credit cards in Spain
A revolving credit card contract sets a maximum amount that may be borrowed, for example, €2,000 a month. This amount goes down as you use the credit card. While you have the option to pay off the full amount borrowed at the end of each month, you can also choose to repay the minimum only, say €300. If you do this, you still owe the credit card issuer €1,700, on which interest at between 20% and 30% a year is applied.
Unless you pay off the full debt, interest is applied every month on the amount you owe and as a result, you find yourself in spiralling debt. The amount owed on a revolving credit card is often considerably higher than the actual sum you borrowed and increases every month.
Latest court sentence on interest charged by revolving credit cards
In 2015, the Spanish Supreme Court declared that the interest charged by revolving credit cards in Spain was usurious (excessive).
The court ruling (628/2015) stated that lenders must refund all interest charged to credit card holders if the interest rate is considerably higher and “manifestly disproportionate to the circumstances”.
In early March 2020, another Supreme Court ruling overturned an appeal made by Wizink. The company, one of the main providers of revolving credit cards in Spain, had appealed against a sentence ruling in favour of a cardholder who took out a revolving credit card in 2012 with an interest rate of 26.82%.
Defining exorbitant interest rates
Interest rates in Spain are determined by the Equivalent Annual Amount (Tasa Anual Equivalente/ TAE in Spanish).
Anything much higher than the official TAE may be considered “manifestly disproportionate to the circumstances”, giving revolving credit cardholders grounds to claim a refund for the interest charged.
To find out what the official interest rate is (TAE), click here.
Choose the year from the drop-down box on the left and click search. The TAE percentage is under ‘Créditos’. In January 2020, for example, the rate was 8.42%.
First steps to claiming back interest charge on revolving credit cards in Spain
Your first step should be to take professional advice. At Costaluz Lawyers, we offer a free consultation to assess your case and decide if you have grounds to claim a refund.
Get in touch to book your appointment.