El blog de Maria

 Álava Provintial Court Case dated the 13rd of April of 2001 is on the abusive character of  interests on delay payments rated at 18% in a mortgage loan between a consumer and a Bank.

The claimer considers that the interest need to be reduced to 2.5 times the legal interest at the time of the contract (10.62%), based on provision 19.4 of the Consumer Credit Act. 

Although the ruling states that the analogy is inappropriate because the cited article refers to the remunerative interest on the overdraft, which is not what it is being considered by the Court decision, the same decision states that the formula
above is a relevant reference on reasonable financial costs of the Bank.

This interesting Court decission establishes that despite these agreements being the object of agreement between the two parties,  in Spain, autonomy of the will is always limited by the force of Law, Moral and Public Order. This opens the gate for a possible analysis on the abusive character of the fixed interest.

 Although none of the consumer protection rules sets a clear limit to agreements about interests on delay payments, this legislation is always concerned about abuses when granting credits and  prohibits the imposition of compensations which are disproportionately high to the consumer who does not meet its obligations. 

Taking into account that the legal interests when the loan was signed was of 4.25%, the agreed delay interest was more than 4 times the legal one. Therefore, the Court  considers that compensation is disproportionate and therefore  overrides  the clause as abusive and proceeds to the integration of the contract, fixing the interest on arrears in 10.62%.

Zahara, Costa de la Luz, Cádiz beach at Flickr by soyignatius