Spanish revolving credit cards and their status
REVOLVING credit cards are a form of financing, since they allow the repayment of money received from the bank, in a flexible way, normally through monthly payments, which will correspond to a fixed monthly fee, or, where appropriate, a percentage of the pending debt.
Many banks in Spain have sold this type of card to their clients, highlighting only their advantages, the fundamental one being that the client must repay each month the fixed amount or percentage amount that has been agreed with the bank, which seems a very good idea, because even if the client spends more money, they will only have to pay that agreed monthly amount.
In addition, it is common for Spanish banks, to make this type of card or in some cases credit more attractive to their customers, by offering then with other advantages such as not charging commission for the card or returning a percentage of the total money paid by the client using the card.
As part of the content of this contract, the bank imposes a maximum amount of allowed credit, an amount or percentage to be paid back monthly and the interest rate to be paid.
The difference with normal credit (charge) cards, where the client pays back the amount spent normally in the following month, in this type of revolving credit card a debt of some amount is usually always maintained in some form, because if the monthly instalment is not high, the consumer will often only pay part of what is owed or sometimes only part of the interest and it is possible that each month the client will owe more money and never repays the total amount spent so there will be a regular increase in the debt due to interest.
What are the risks of revolving credit cards?
The main problem is that the interest charged by the bank is very high and in many cases, for this type of product, the bank charges interest higher than 20 per cent.
Sometimes, clients focus their attention on the fact that they will pay a fixed monthly payment and not on the problem of this high interest rate, which can make the agreed instalments insufficient to even pay the interest which then becomes an eternal debt.
Are they legal, can these revolving credits be declared null and void?
There are many Spanish courts that have already ruled on this type of credit or revolving credit card, even declaring it improper, as they understand that the amount of interest charged is excessive and contrary to the law of Repression of Usury.
The consequence of the cancellation of this type of credit agreement supposes that the borrower (client of the bank) must return the money received from the entity, without having to pay any interest.
In this regard, the Spanish Supreme Court itself has agreed with the concept and ruled in its favour in judgment 628/2015.
Also, the contract between the bank and the client must consist of simple and clear wording and should be transparent so that the consumer is be able to understand the economic, financial, legal, etc. effects of all clauses.
Legally it is possible to attempt to cancel any contract covering this type of product, arguing there is an element of abusive, usurious, interest charged, but you should know, that not all courts recognise that this type of contract can be nullified, so it will be necessary to study each case individually.
Therefore, if you, as a client of a Spanish bank, are affected by a revolving card or credit, and need the advice of a lawyer, contact us and we will help you.
The information provided in this article is not intended to be legal advice it simply imparts information related to legal issues and refers to matters of Spanish law only .
Carlos Baos (Lawyer)
White & Baos
Tel: +34 966 426 185
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