Revolving Credit Cards: How to Annul the Contract and Recover Excessive Interest

What Is a Revolving Credit Card

A revolving credit card is a consumer credit instrument that allows the cardholder to use a renewable credit line. Unlike conventional credit cards, where the balance is settled in full the following month, with revolving cards the holder pays a fixed monthly instalment or a percentage of the outstanding balance, and the remainder is deferred, generating interest.

The mechanics of revolving credit work as follows: each month a payment is made (which can be very low, 2% to 5% of the balance), but since the interest rates applied are high (APR of 20% to 30% or more), a significant portion of each payment goes towards interest and only a small fraction amortises principal. The result is that the debt perpetuates itself: the consumer can spend years paying and barely reduce the original balance.

The Financial Trap of Revolving Credit

The fundamental problem with revolving credit is mathematical. With a balance of EUR 3,000, an APR of 25%, and a minimum payment of 3% monthly (EUR 90), the consumer would pay:

• First month: EUR 62.50 in interest, EUR 27.50 in principal repayment
• The debt barely drops to EUR 2,972.50
• Total time to clear the debt: more than 7 years
• Total interest paid: more than EUR 4,500 (150% of the original capital)

If the consumer continues using the card (which revolving permits), the debt can grow indefinitely.

Legal Framework: The Usury Suppression Act of 1908

The Azcarate Act

The legal basis for combating revolving credit cards is the Act of 23 July 1908 on Usury Suppression, known as the Azcarate Act (Ley Azcarate). Despite being over a century old, this act remains fully in force and has proven to be the most effective legal instrument against the abusive interest rates of revolving credit.

Article 1 of the Azcarate Act provides that any loan contract stipulating interest notably higher than the normal rate of money and manifestly disproportionate to the circumstances of the case, or on terms that are unconscionable, shall be void.

Consequences of Nullity for Usury

A declaration of usury produces radical effects (Art. 3 Azcarate Act):

• Contract nullity: The contract is void ab initio from its execution.
• Return of capital: The borrower is only obliged to return the capital actually drawn.
• Return of interest: The lender must return to the borrower all interest paid in excess of the capital.
• No statute of limitations: The usury nullity action is not subject to any limitation period, like any action for radical or absolute nullity.

The Supreme Court Judgment of 25 November 2015 (STS 628/2015)

The First Major Revolving Ruling

STS 628/2015 was the first Supreme Court decisión applying the Azcarate Act to a revolving credit contract. The case concerned a credit line agreement with Sygma Hispania (a BNP Paribas subsidiary) with an APR of 24.6%.

The Supreme Court established fundamental criteria:

1. Reference index: To determine whether an interest rate is "notably higher than the normal rate of money", it must be compared with the average rate for similar operations published by the Bank of Spain. Not with the legal interest rate or the Euribor.

2. No distressed situation required: Unlike classical usury, it is not necessary to prove that the borrower was in a situation of need, distress, or inexperience. It is sufficient that the interest is notably higher than normal.

3. APR as reference: The APR (Annual Percentage Rate) is the relevant indicator, not the nominal rate, as it includes fees and other charges.

The Supreme Court Judgment of 4 March 2020 (STS 149/2020)

Consolidation of the Doctrine

STS 149/2020, delivered by the Full Chamber of the First Division, consolidated and completed the doctrine on revolving credit cards. The case concerned a Wizink card with an APR of 26.82%.

Criteria Established

The Supreme Court clarified several essential aspects:

1. Comparative reference: The interest rate must be compared with the Bank of Spain statistics on consumer credit in the credit card and revolving category. Not with general consumer credit, which has lower rates.

2. Usury threshold: The Court did not set an exact numerical threshold but indicated that an APR exceeding the average rate for similar operations by more than 6 percentage points is susceptible to being considered usurious.

3. Irrelevance of individual negotiation: The fact that the interest rate was accepted by the borrower does not prevent the application of the Azcarate Act, as usury constitutes a public policy limit.

4. Burden of proof: It falls on the lender to prove that the agreed interest is not disproportionate, once the borrower demonstrates that it is notably higher than normal.

Evolution of Thresholds

Following STS 149/2020, Provincial Court case law has been refining the thresholds. As a general reference, the average rates published by the Bank of Spain for revolving credit operations have ranged between 18% and 20% APR. Based on this data:

• APR up to 20-22%: Within the normal range; difficult to declare usurious.
• APR of 23-26%: Grey area; depends on specific circumstances and the time of contracting.
• APR above 27%: High probability of a usury declaration.
• APR above 30%: Virtually certain declaration of nullity for usury.

These references are indicative. Case law analyses each case individually, comparing with the average rates in force at the time of contracting the credit.

How to Claim Contract Nullity for Revolving Credit

Step 1: Gather Documentation

Before initiating the claim, the consumer should gather:

• The revolving card contract (or request a copy from the institution)
• Statements of transactions and settlements
• Proof of payments made
• Correspondence with the institution
• Bank of Spain statistics on average rates at the date of contracting

Step 2: Calculate the Actual APR

In many revolving contracts, the actual APR is higher than stated in the contract because certain fees or linked insurance are not included. It is important to calculate the effective APR including:

• Nominal interest rate
• Opening fee (if any)
• Cash withdrawal fee
• Payment protection insurance (if mandatory or semi-compulsory)
• Maintenance fees

Step 3: Extrajudicial Claim

Although not legally mandatory (unlike floor clauses), it is advisable to submit a written claim to the institution's customer service department, setting out:

• The applied APR and its comparison with the Bank of Spain average rate
• The request for contract nullity on grounds of usury
• The amount claimed (interest paid minus outstanding principal, or vice versa)

Step 4: Court Proceedings

If the institution does not address the claim, a lawsuit is filed requesting:

1. Declaration of nullity of the contract as usurious
2. Order for the institution to return the difference between amounts paid and capital actually drawn
3. Legal interest from the filing of the claim (or from each undue payment, depending on the case law position)
4. Legal costs

Applicable Procedure

• If the amount does not exceed EUR 15,000: verbal proceedings (no lawyer or court representative required if it does not exceed EUR 2,000)
• If the amount exceeds EUR 15,000: ordinary proceedings (lawyer and court representative mandatory)

The Alternative: Nullity for Lack of Transparency

When the APR Does Not Reach the Usury Threshold

If the revolving contract's APR is not high enough to be considered usurious, there is an alternative route: nullity for lack of transparency of the interest clause, applying the doctrine of general contractual conditions (Arts. 5-7 LCGC) and consumer regulations (Art. 83 TRLGDCU).

For this route to succeed, it must be demonstrated that:

• The interest clause is a general contractual condition (pre-drafted, not individually negotiated)
• The consumer was not adequately informed of the real cost of the credit
• No amortisation simulations were provided
• The consumer did not understand that, with the minimum payment, the debt might not decrease or could even grow

Difference from Usury Nullity

The practical difference is significant:

Aspect	Usury Nullity	Lack of Transparency Nullity
Legal basis	Azcarate Act 1908	LCGC + TRLGDCU + Directive 93/13
Effect	Total contract nullity	Nullity of the interest clause
Restitution	Only return capital drawn	Substitutionary legal interest
Evidence	Compare APR with average rate	Demonstrate lack of information
Limitation	Not subject to limitation	Debated

Lexiel as a Tool for Revolving Credit Claims

Revolving credit card claims require precise knowledge of evolving case law, Bank of Spain statistics, and applicable legislation. Lexiel can assist the lawyer with:

• Updated case law search: Finding recent Supreme Court and Provincial Court rulings on revolving credit cards, with filters by court, date and territory, and semantic search to describe the APR, issuer or outcome.
• Threshold verification: Comparing the contract's APR with the average rates published by the Bank of Spain for the date of contracting.
• Azcarate Act analysis: Consulting the current judicial interpretation of Article 1 of the Usury Suppression Act.
• Drafting claims: Generating draft claims with appropriate legal reasoning, distinguishing between the usury route and the lack of transparency route.

Lexiel checks the legal and case law citations it generates against the BOE and CENDOJ and flags those it cannot confirm, so you can review them before filing.

Frequently Asked Questions About Revolving Credit Cards

Can I claim if I am still paying off the card?

Yes. The usury nullity action is not subject to any limitation period. It can be exercised at any time, whether the card is active or already settled. If the card is active, the court may order as an interim measure the suspensión of charges while the proceedings are pending.

What happens if I owe more than I have paid?

If the court declares the contract null for usury, the consumer only needs to return the capital actually drawn. If they have paid more than the capital drawn, the institution returns the difference. If they have paid less, they owe the difference but without interest (principal only).

Are revolving cards from large retailers also claimable?

Yes. Revolving cards issued by El Corte Ingles, Carrefour, MediaMarkt, IKEA, and other large retailers are claimable if the APR is usurious or if they were contracted without due transparency. Many of these cards apply APRs exceeding 25%.

How long do court proceedings take?

Court proceedings for a revolving credit card typically last between 6 and 18 months at first instance, depending on the court's caseload. If there is an appeal, it can extend for another 6-12 months.

Can I claim back the payment protection insurance costs?

Yes, if the insurance was an imposed condition or presented as necessary for the granting of the card. Case law admits the claim for insurance premiums as part of the amounts unduly charged, especially when the insurance increases the effective APR of the contract.