A multitude of court rulings have ruled that the excessive interest applied to revolving cards can imply usury and that, therefore, the affected customers can claim them and get a refund of the money paid in excess.
What is a revolving card? And why are they considered “abusive cards”?
Revolving cards are a banking product that works like consumer credit: they provide the user with credit that they can repay in installments by applying interest.
In other words, payments made with a revolving card can be made regardless of whether funds are available in the associated account and they promise flexibility when repaying the amount borrowed. In addition, the revolving credits are reset monthly, so consumers can use the contracted amount again.
Revolving cards can be very attractive, although many people are not aware that they can act as a double-edged sword: many legal professionals call this type of credit “abusive cards” because in most cases they hide behind the loan some very high interests, which in some cases can exceed 25% APR. Interests of this type can be considered judicially as usury, which would imply that they are excessive and illegal.
Can revolving cards imply usury?
A multitude of court rulings guarantee that some types of interest applied to revolving cards imply usury. The most relevant is the Supreme Court Judgment No. 4810/2015, of November 25, which resolves that revolving cards can incur usury by establishing “an interest notably higher than normal money and manifestly disproportionate”. This sentence is based on article 1 of the Usury Repression Law of 1908.
The jurisprudence that has been created on revolving cards in recent years opens up a very relevant judicial channel so that affected users can claim their revolving cards .
What happens if a judge considers that a resolving card incurs usury?
If the judge considers that the financial institution that issues a revolving card acts in a usurious manner by establishing abusive interest, then the contract will be annulled. This implies that the borrower will only be obliged to deliver the amount received, without interest.
In addition, in the case of having returned more money to the financial institution than the amount that was lent, the bank must reimburse the amount collected in the form of interest.
How do revolving cards work in Tenerife and throughout Spain?
Revolving cards promise flexibility at the time of payment and are very attractive precisely because they allow you to pay the credit in monthly installments that are usually very low. But this is where the trap lies: this type of low installments hide very high interest rates that in practice do not allow the loaned capital to be repaid.
Regardless of whether or not funds are available in the associated account, the user of a revolving card can continue to make payments with it. In this sense, it works like a regular credit card, but revolving cards make it possible for the payment of the debt to be deferred beyond the settlement date. Purchases made with these cards are equivalent to those made with a consumer credit balance.
When paying off the debt, financial institutions offer three payment methods:
- Pay a fixed percentage of the debit balance each month. These percentages usually range between a minimum and a maximum.
- Pay a fixed fee each month. This previously established amount will have to be paid monthly until the full debt is paid. As in the case of the payment of a percentage, the installments will vary between a minimum and a maximum to be paid.
- Pay the entire loan in arrears. In these cases, the debt is paid off at the end of the month, as it would be done with a normal credit card, and it does not usually generate interest.
Banks get a higher return on the loan if customers defer their payments.
That is why they offer payment terms with relatively small amounts so that customers opt for these options and be able to charge them interest, which generally ranges between 20 and 25% APR.
By paying only small amounts of the entire debt monthly, it can take several months to repay the credit and large interest costs accumulate.