The latest Supreme Court rulings against revolving cards have generated some confusion among users of this financial product. Those who at first were determined to claim for the payment of usurious interest, may now have their doubts. And it is that the high court, in its ruling number 643/2022 of October 4, has supported the bank by declaring that an Annual Equivalent Rate (TAE) of between 23% and 26% is not usurious.
At the same time, in its ruling 662/2022 of October 13, the Supreme Court declared a credit card contract with a 16.08% TAE null and void. Faced with this somewhat contradictory panorama, doubts, conjectures and misinterpretations have not been few. What conclusion can be reached in light of the latest rulings against revolving cards?
The first thing to clarify is that the Supreme Court does not consider 16% interest on a revolving card to be usury. The confusion stems from one of the latest Supreme Court decisions against these plastics, ruling 662/2022 of October 13, which declared a revolving card contract with a 16.08% APR null and void.
Initially, the judgment of the Provincial Court of Cantabria of July 2, 2018 was limited to declaring null and void only the clause that sets the interest rate. However, in the appeal before the Supreme Court, the appellant requested that the nullity affect the entire contract. The Supreme Court agreed with this request and declared the entire contract null and void based on the Usury Law, and not only the interest clause.
In this particular case, the controversial assumption is not the issue of what Annual Equivalent Rate should be applied. Rather, the issue lies in determining the nullity of the entire contract or just the interest clause based on a ruling that declares the general condition of remunerative interest null and void. But at no time did the Supreme Court discuss the issue of what APR to apply, much less sentence a revolving card with 16.08% APR as usurious.
The APR between 23% and 26% is not usurious
Among the latest Supreme Court rulings against revolving cards, number 643/2022 of October 4 stands out, a ruling that gives reason to the bank and confirms the jurisprudence established in ruling No. 367/2022 of May 4. According to the high court, to determine if a revolving card is usurious, its interest rate must be compared with the average rate applied in the market for cards with the same characteristics. This means that the interest rate applied to consumer loans is not used to make the estimate.
In the judgment of October 4, the First Chamber of the Supreme Court dismissed the appeal filed by a client against a judgment that declared a revolving credit contract signed in 2001 with an APR of 20.9% not usurious. One of the arguments put forward by the Supreme Court is that, on the date the contract was signed, the revolving credits had an average annual interest rate of 24.5%. The estimate was calculated based on the average interest on products such as reloadable and deferred payment cards, similar to revolving cards.
In addition, in the decade 1999-2009, the average annual interest on these products ranged between 23% and 26%, a range higher than the interest agreed in the contract that is the subject of the lawsuit. For all this, the Supreme Court supported the decision that the Provincial Court of A Coruña had initially taken to dismiss the appeal. Likewise, it ratified the jurisprudence established in judgment 367/2022 of May 4, which caused such a stir among legal operators and users of revolving cards.
The latest rulings against revolving cards provide some legal certainty in disputes relating to products contracted in years without official statistics. It must be remembered that the Bank of Spain publishes the average figures of the Equivalent Annual Rate since 2010. To determine if the APR is usurious in the revolving contracted in previous years, the percentage will be compared with the average figures of products most similar to revolving, and not with consumer credit.
However, the new approach that the high court is giving to revolving card cases does not make it clear what is the margin over the average APR that is considered admissible in order not to incur usury. What the latest judgments have made clear is that the client is not always right when it comes to claiming usurious interest. Therefore, before contracting a financial product of this type, it is essential to read the fine print carefully.
