What the Supreme Court clarified about usury and revolving credit cards
A recent Supreme Court decision, issued on May 4, aims to clarify what constitutes usury in the face of widespread complaints about revolving cards and the inconsistent price references used in prior rulings.
This ruling, the third by the Supreme Court since 2015 on the subject, aligns with the stance taken by the Albacete Provincial Court. It centers on an equivalent annual rate (APR) of 24.5%, noting that the price of a revolving card contract from 2006 was not considered usurious. At that time, it was common for revolving cards issued by major banks to carry annual rates in the 23% to 26% range, a pattern that persists today. The decision emphasizes that historical practices in the market do not automatically justify current terms and highlights the need to assess prices against actual market norms at the moment a card is issued.
With this decision, the Supreme Court seeks to dispel confusion about the fair price of money for revolving cards. Previously, the Court’s 2020 ruling had become the reference point for courts, leading to a variety of price references published by the Bank of Spain. This new ruling recalibrates that framework and clarifies how to measure what constitutes a reasonable APR for revolving credit products.
What was happening with contract cards before 2020?
Before 2010, the Bank of Spain did not publish specific price references for revolving cards. As a result, most courts relied on consumer loan data as a reference point. The Supreme Court now makes it clear that revolving cards are not comparable to standard loan products, and the reference must be the APR specific to revolving cards. The underlying issue is that no government agency in Spain regularly tracks or averages the APR of revolving credit products, a shortfall this decision highlights when evaluating potential usury.
In the Court’s latest ruling, parties are expected to prove the usual APRs banks apply to their revolving products, meaning litigants must determine the market prices at the time of contracting the card. This new approach helps identify whether the charges were usurious. A financial comparator noted that the reduced rates often cited in prior decisions did not fully account for commissions and other card-specific costs, which can distort the true cost of credit.
Winning a case against a revolving card will be more complex
Legal experts consulted indicate that it remains valid to challenge the prices charged for revolving cards against the bank’s terms. The Supreme Court ruling does not constitute a wholesale correction of legal doctrine; rather, it refines how courts evaluate the prices associated with revolving credit. Some sources suggest the ruling could reduce ongoing litigation over certain products and potentially alter the interpretation of pending penalties in related cases.
Historically, consumers who argued that the interest charged on revolving cards was excessive often won their cases. The new decision introduces greater uncertainty, particularly for those still pursuing lawsuits. If a party loses a suit, there could be penalties and recovery of attorney’s fees, a consideration highlighted by industry experts advising cautious evaluation of expected outcomes before proceeding.
The net effect is a shift toward a more precise measurement of APR for revolving cards. This means litigants should focus on establishing the market norms for these products at the time of contracting and be prepared for a more nuanced analysis of what constitutes fair pricing. (Cited: iAhorro and Banqmi experts)