Supreme Court Decides What Makes a Loan UnfairConsequences Of A Finding That Consumer Credit Has Is Usurious
The consequences of a finding that an offer of credit is usurious are as follows according to the judgment of the Plenary Session of the Supreme Court:
- The usurious “revolving” credit arrangement granted by the Bank entails that the contract is invalid and has been described by the 1st Chamber of TS as “total, absolute and complete”, and permits of no acceptance whatsoever because it is fatally irreparable , nor may the contract be susceptible to prescription, as a result of expiry of a long period of time, for example. “( STS no. 539/2009 , of July 14, 2009).
- The consequences of such invalidity are those laid down in Article 3 of the Law of Repression of Usury , that is, the borrower is obliged to return only the amount received. In the case under appeal , the defendant (lender) had actually paid the applicant (the borrower) a higher amount than he had received , so the complaint was completely dismissed. The lack of a prepared counterclaim prevented the application of the second part of the provision, according to which , if the borrower had only paid back part of the loan received including principal and interest due , the lender would have to return to the borrower any amount which exceeds the borrowed capital.
- As the defendant had paid an amount greater than that loaned to the applicant, it was not necessary to proceed to the return of interest on arrears, which meant it was unnecessary for the court to have to rule on the second ground of appeal , which raised a question that has already been settled by the jurisprudence of the Supreme Court ( SSTS no. 265/2015 , of April 22 , and 469/2015 , of September 8 ). Moreover, the high court understood that such irresponsible lending practices, providing easy access to consumer loans, without properly studying guarantees provided by the borrower, but at much higher interest rates than normal in order to compensate for late payments, results in those who regularly meet their repayment obligations have to carry the burden for those who are unable to, and this cannot be protected by law”.