Usury in 'revolving' cards: collateral damage from the Supreme Court ruling

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The Supreme Court has spoken: a revolving card with an interest rate of 27% is usury . This has been decided after dismissing an appeal filed by WiZink against a ruling in which the contract of a revolving card issued by the entity was canceled with an interest of 27.24% APR for being disproportionate. The High Court considers it "remarkably higher" at the average interest rate of credit cards, which is around 20%, which, he adds, "is already very high" in itself.

The Civil Chamber reasons that to determine when the interest of a revolving card is usury, the average interest applicable to the category to which the operation corresponds must be taken as a reference, in this case that of the cards themselves and not that of consumer loans.

Who can claim?

The Justice does not clarify the limit from which the interest of a credit card is significantly higher than the average, so it raises the doubt about which affected by revolving cards can claim and which not. Those whose contracts set interest rates of 27% or higher may claim the nullity of the contracts and request, in accordance with the Usury Act of 1908, that the interest they have paid be returned.

According to the aforementioned law, which has more than a century of history, if a user contract is canceled, the borrower will only have to repay the principal . In the case of having already paid a higher amount due to interest, the entity will have to return what it has overpaid.

However, consumers whose revolving cards have lower interest rates than the case studied (below 27.24% APR), will be at the expense of the judgment of each judge, who must assess whether their interest rate is disproportionate or not, at the Supreme Court has not set a specific classification criteria.

The financial product comparator HelpMyCash.com has launched a revolving card calculator that allows to calculate how much interest is paid for a purchase based on the TIN of the card and the repayment system and, therefore, how much could be recovered if our card were declared usury.

Those consumers who consider that their cards have a disproportionate interest, can submit a claim directly to their bank or resort to judicial proceedings.

The Supreme does not 'buy' the bank's arguments

The Supreme Court has not considered one of the usual arguments used by banks to justify the inclusion of high interest rates in their credit cards. According to the statement issued by the court, "the Chamber reasons that it is not possible to justify the establishment of an interest significantly higher than normal for the risk arising from the high level of defaults tied to credit operations granted in an agile manner". And he adds that "the irresponsible granting of consumer loans at interest rates much higher than normal, which facilitates the over-indebtedness of consumers, cannot be protected by the legal system."

Collateral damage: more requirements and fewer cards?

This decision opens up endless questions. On the one hand, the Civil Chamber does not clarify who can claim, by not setting a clear criterion, but also opens the way for the card market to change the rules of the game . If the bank can no longer incorporate interest rates in line with the risk it says it assumes when issuing this type of plastics , its concession could be considerably hardened and credit cards would be reserved for customers with a premium profile, sources from HelpMyCash explain. This would negatively affect part of the traditional public to which these types of cards are usually destined, which, according to the Supreme Court, are "individuals who cannot access other less burdensome credits". So this group would have even more difficulty financing.

In addition, the bank could reduce the credit limit associated with the cards in circulation, considering that the risk it assumes no longer compensates and even opens the door for entities to cancel thousands of plastics unilaterally , according to HelpMyCash. There are currently more than 35 million credit cards in circulation in our country according to the Bank of Spain.

The sentence can be a million dollar bill for the bank, so it is possible that you try to recover the money or part of it by other means, for example, increasing the commissions of the cards themselves.

What we can expect is that financial institutions and banks reduce the interest on deferred payment transactions associated with their cards, to prevent their plastics from being declared usurious in the future.

According to the criteria of The Trust Project

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