The Bank of Spain is ready to limit the interest rate on consumer loans
Consumer loans and credit cards are one of the banking business segments that generate the most litigation. Mainly due to the high interest rate applied to the client in these transactions, in many cases amounting to so-called usury. In this sense Bank of Spain opens up the study of a possibility that clarifies when a loan should be considered usurious: setting the maximum cost of these loans to the client. In other words, set a limit on the interest that lenders can charge.
Director General of Supervision Mercedes Olano asked for “reflection” on this possibility, also thinking about the decisions that other countries have taken. Typically, as consumer associations decry, interest rates, especially on credit cards, add up to 3,000%.
Directors of the Bank of Spain at the Axactor consumer banking forum recalled “the high interest rates that apply to some consumer products (from regulated and non-regulated entities) and which are sometimes considered by the courts as loan sharks. He stressed that “perhaps we should reflect on what other jurisdictions, such as Portugal, have done, which have put an end to legal uncertainty through quarterly publication maximum annual interest rate will be used in various consumer lending products.
The aim being pursued is to put an end to the legal uncertainty in this matter, which ultimately leads to a high level of litigation between customers and banks due to the lack of clear criteria to be followed. Olano emphasized that the Supreme Court has made some progress in clarifying the concepts in its jurisprudence in determining what is usury and what is not, but the issue continues to be controversial in the courts.
In Spain we currently follow what is dictated by more than 100 years of usury law, which states that “any contract of credit which provides for interest noticeably in excess of the normal amount of money and clearly disproportionate to the circumstances of the case will be void.” in such conditions that he turns out to be a lion. The concept of something “significantly superior” This is something that the courts have had to develop as the Supreme Court has changed the criteria several times in recent years. Finally, the High Court, in a case involving “renewable” cards, which are the most sought after, updated its case law to indicate that interest is significantly higher if the difference between the average market rate and the agreed rate exceeds six percent. .
High interest rates have led to an increase in customer litigation against banks and lenders.
However, this solution, which must be considered on a case-by-case basis, does not seem sufficient either for the Bank of Spain or for consumer associations, which demand, among other things, a cap on interest on consumer credit to ensure legal certainty. . “We are advocating for a system of reassurance for consumers and operators that will bring over-indebtedness under control. Not only in terms of interest rate limits, but also in the fact that it allows us to distinguish market operators who apply best practices from those who do not,” Asufin’s sources indicate.
The OCU, for its part, asks Government also establish by law maximum interest rates. “France, Italy and Portugal, among other European countries, have for many years already legislated maximum limits on interest rates applicable to consumers,” they remind.
European regulation
The truth is that Europe wanted to tackle this issue with a directive on consumer credit, approved a few months ago, but which is not due to apply until the end of 2026. “Setting maximum limits (…) is common practice. in several member states. This system of restrictions has proven effective in protecting consumers from excessively high interest rates (…), the text says.
Thus, the directive states that “Member States must introduce measures to effectively prevent abuse and ensure that excessively high borrowing rates, equivalent annual rates or the total cost of credit to the consumer cannot be imposed on consumers, such as maximum limits. This possibility is being considered, but with the provision of freedom of action to countries. In any case, the matter will be in the hands of the national legislator.