The judgment of Supreme Court of 25 November 2015 cancelled a banking contract (consumer loan) on the grounds that it was usurious. The events date back to 2001 when a particular signed a personal loan with a limit of up to 30,000 euros available. The contract set a remunerative interest of 24.60% APR and a default interest consisting of increasing 4.5 points the remunerative interest. The consumer disposed for about 25,600 euros which generated 18,500 euros of accrued interest. He had paid back to the bank the sum of almost 32,000 euros and the bank asked for the balance of 12,200 euros. As shown, the amount that was paid to the bank was about 6,000 euros higher than borrowed capital.
The bank sued the client before a Court in Barcelona that proved him right. On appeal, the High Court confirmed the first instance judgment. Therefore, the consumer was enforced to pay the amounts claimed (according to assessment made by the plaintiff bank) including fees and default interest.
The client understood that the loan should be considered fully paid, so he appealed before the Supreme Court for violation of the Law of 23 July 1908 (Azcarate Act) of Repression of Usury and also the General Law for the Protection of Consumers and Users, since the remunerative interest of 24.60% was more than twice the average interest rate on consumer credit on the date on which the contract was concluded.
The Supreme Court gave the reason to the consumer nullifying the loan agreement for incurring in two requirements imposed on Azcarate Act to be considered usury since the fixed interest was more than twice the average interest rate on loans at the time of the signature of the loan.
The 1908 Act says, "is void and null a loan agreement that a significantly fixes an interest higher than normal, manifestly disproportionate to the circumstances or conditions that may result leonine". The Court states that just two requirements for the operation to be considered usurious are needed. In this case : 1) significantly interesets higher than normal and 2) manifestly disproportionate to the circumstances .
The Supreme Court added that it cannot justify excessive interest "based on the risk arising from the high level of defaults added to loans for consumption of an agile way granted without properly checking the payment capacity of the borrower, because the irresponsible lending to consume with interest rates higher than normal, which facilitates the overindebtedness of consumers and results in those who regularly meet their obligations have to bear the consequences of the high level of defaults, can not be subject of law protection”.".
It should be noted that the judgment nullified the contract and that the 1908 Act provides that if the contract becomes null and void the borrower will be enforced to return to the bank only the amount received. In this case the customer had paid more than that amount so default interests were not applicable.
It is important to point out in this case that the client did not cease in its efforts to appeal to the highest levels even when it appeared that just little could be done against judicial decisions in the first two instances. On the other hand, applying not only the new Law on Protection of Consumers and Users (now Royal Decree 1/2007 of 16 November, approving the revised text of the General Law for the Protection of approved Consumers and Users amended by Law 3/2014 of 27 March), but also a Law of 1908 which is still in force and on the basis of the loan could be cancelled.