In recent years, revolving cards have been the subject of numerous complaints and lawsuits in Spain. These cards, which allow deferred payment for purchases by means of a fixed monthly instalment or a percentage of the outstanding balance, may seem an attractive option for managing expenses. However, many people have discovered that the conditions of these financial products can be abusive, leading to situations of over-indebtedness due to the exorbitant interest rates involved.
At Lexnova, we have a team specialised in revolving card claims. In this blog, we explain what they are, the most common problems associated with them, and how you can claim if you feel harmed.
What is a revolving card?
A revolving card is a type of credit card that allows you to pay for your purchases in monthly instalments. Unlike traditional credit cards, where you can pay the full amount at the end of the month, with a revolving card you pay back the balance in instalments. The main problem is that, although the monthly payment is fixed or a small percentage of what is due, the interest charged is very high, which means that the outstanding balance does not decrease or even increases over time.
Main features
- Deferred payment: Purchases are repaid in monthly instalments.
- High interest rates: The interest rates applied are often higher than 20% APR, which can make it difficult to repay the debt.
- Fixed fee: The customer pays a fixed amount or percentage per month, but a large part of this fee is used to pay interest, rather than to reduce the capital borrowed.
Risks of Revolving Cards
Although revolving cards may seem attractive because of their flexibility, it is important to be aware of the risks involved:
Over-indebtedness
The main risk of these cards is over-indebtedness. By deferring payment on purchases and accumulating high interest rates, cardholders can end up in a situation where a large part of their income goes to pay off debts that never seem to reduce. This can lead to a cycle of debt that is difficult to break.
Abusive interest rates
In many cases, the courts have found the interest rates charged on some revolving cards to be abusive. Spain’s Supreme Court has already handed down rulings declaring the clauses of this type of card to be null and void when the interest rates are excessively high compared to the average interest rate for consumer credit.
Lack of Transparency
Another common problem is the lack of transparency with which these cards are marketed. Users are often not fully aware of the high interest rates they are assuming and the consequences of opting for minimum payments. Financial institutions often promote revolving cards as ‘easy credit’ products without detailing the risks.
Problems associated with revolving cards
Revolving cards have been identified as one of the most damaging financial products for consumers because of their high interest rates and the difficulty of repaying the debt. Many users are trapped in a spiral of debt that never seems to end, as the monthly instalments hardly cover the outstanding capital, only the interest.
Usurious interest rates
The Supreme Court has handed down several rulings in which it considers the interest charged on this type of card to be usurious. According to case law, when the interest rate on a revolving card is significantly higher than the average interest rate on the market for similar products, it is considered abusive and therefore null and void. This opens the door for thousands of consumers to claim.
Lack of transparency
Another common problem is the lack of transparency in the information that banks provide to their customers. Many users claim not to have been adequately informed about the terms and conditions of their cards, especially with regard to interest rates and how the debt is repaid. This lack of clarity can also be grounds for complaint.
How can you complain?
If you have a revolving card and you consider that the interest you have been charged is abusive, you can start a complaint process. Here are the steps to follow:
- Review the contract
The first step is to review your revolving card contract to check the conditions, especially the interest rate applied (APR). If the interest rate is very high, above 20%, it is likely to be a case of usury. - Out-of-court complaint
Before going to court, it is advisable to try an out-of-court complaint to the financial institution. This can be done by means of a formal letter requesting the nullity of the contract for usury and demanding the return of the interest paid in excess. - Legal proceedings
If the financial entity does not respond or does not accept the claim, the next step is to initiate legal proceedings. At Lexnova Lawyers, we have extensive experience in this type of cases and we will accompany you throughout the whole process, from the filing of the claim to obtaining a favourable judgement.
What does the jurisprudence say?
The Supreme Court has played a crucial role in the defence of consumers against revolving cards. In its judgment of March 2020, it ruled that interest rates higher than 20% APR applied to these cards are usurious and, therefore, null and void. Consequently, the bank or financial institution is obliged to repay all interest overcharged to the customer, limiting the payment only to the capital borrowed.
Since then, numerous rulings have followed this line of jurisprudence, which has led to an increase in claims for this type of product. The ruling considers that applying such high interest rates violates the Usury Law, also known as the Azcárate Law.
Consequences of a favourable ruling
If the judge considers that your revolving card contract is usurious, the consequences are clear:
- Nullity of the contract: The card contract will be declared null and void.
- Return of interest: The financial institution will have to return all the interest paid in excess.
- Payment only of the capital: You will only be obliged to pay back the capital that you have actually used, without interest.
Why choose Lexnova Lawyers?
At Lexnova Lawyers, we have a team specialised in the claim of abusive financial products, such as revolving cards. Our lawyers have managed multiple successful cases and are prepared to defend your rights against financial institutions.
Advantages of using our services:
- Personalised advice: We study your case individually and provide you with the best legal advice.
- Experience: We have a solid track record of winning cases related to revolving cards.
- Close treatment: We accompany our clients throughout the whole process, making sure they understand every step of the way.
Conclusion
Revolving cards can become a financial trap due to their high interest rates and the lack of transparency in the information provided by banks. If you think you have been the victim of an abusive contract, do not hesitate to contact Lexnova Lawyers. We will help you to claim what you are entitled to and to put an end to the debt spiral generated by this type of products.