Although it may be surprising, the usury loan shark regulation is found in a law that is more than 100 years old: commonly known as the Azcárate Law, the loan shark Repression Law of July 23, 1908.
Its text does not establish when there is or is not loan shark in interest, so it is the Courts themselves who are in charge of marking the degree of application of this norm to the point that the jurisprudence has ended up establishing, using several sentences, which is considered loan shark in Spain.
To understand this ambiguity to which reference is made, it is enough to read article 1 of said law. Says the following:
Any loan agreement that stipulates an interest significantly higher than the normal amount of money and manifestly disproportionate to the circumstances of the case or in such conditions that it is leonine will be void, having reasons to consider that it has been accepted by the borrower because of its distressing situation, inexperience or limited mental faculties.
The contract in which more than the amount delivered is supposed to have been received, whatever its entity and circumstances, will also be null and void. The resignation of own jurisdiction, within the population, made by the debtor in this class of contracts will also be null.
Article 1 of the loan shark Law
As a result of this article, a series of new doubts arise about the concept of interest that should be cleared up.
What exactly is the interest on a loan?
The answer to this question is clear. The interest on a loan is the price to be paid to the lender for the money received. This interest is also known as earning interest.
Two reasons lead lenders to charge interest on loans:
- The first is the search for a profit in exchange for losing the part of the capital that the borrowed money supposes.
- Compensate for a possible non-payment by the person receiving the money.
And what is normal money interest?
In this case, it is the normal interest in all those consumer credit operations. The Bank of Spain is responsible for its publication, which collects monthly statistics and information from credit institutions on the interest rates used in asset and liability operations to compile this index.
In this section, it should be noted that the normal interest on money is not the same as the legal interest on money. The first refers to the usual remunerative interest of a consumer loan and the second is the legal percentage established in the General State Budgets.
The latter, the legal interest on the money, is the rate used to determine the default interest that the borrower must pay in case of incurring defaults or delays in the payment of the money.
When does a loan shark exist and what consequences does it have on a loan?
As we have mentioned, the Supreme Court through two sentences has been in charge of outlining when a loan shark exists. Thus, interest rates are considered excessive in cases that:
- Substantially exceed normal interest.
- There is a disproportion to the circumstances of the case.
- There is a situation of inexperience, anguish, or limited mental faculties in the person who has applied for the loan.
Consequences of loan shark
The sanction established, both by law and by the Supreme Court, regarding usurious loans is the nullity of contracts.
This implies that once a loan or revolving card contract is declared usurious, the affected party will be obliged to return only the principal of the borrowed money, without paying any type of interest.
If the borrower has already returned between interest and principal an amount greater than the amount loaned, then the financial institution must return everything that has been overpaid.
Although this term is indeed associated with a century-old law, at present the concept of a loan shark is very topical as a result of the multitude of lawsuits registered at the national level due to the commercialization of revolving cards.
