Interest on late payday loans
The Supreme Court Judgment of April 22, 2015, has set a precedent for knowing when late payment interests are abusive in payday loans.
Have you asked for or are you going to ask for a payday loan and want to know when late payment interests are abusive? Have you paid any fees and want to claim late payment interest? Here is a model to request the nullity of the abusive interests established by your loan and, where appropriate, the repayment thereof.
Remuneration interest and interest on late loans
The first thing to be clear about is that in a loan there are two different types of interests :
- Remuneration interests, which are the ordinary ones that are agreed to remunerate to the bank the money that lends us.
- Interest on late payment, which is what the borrower has to pay in case of default of a loan installment.
Interest on late payday loans: Supreme Court ruling of April 22, 2015
In the case dealt with in the Supreme Court Judgment of April 22, 2015, the remuneration interest on a consumer loan was 11.80% while the interest on late payment was 21.80%, that is, 10% higher than the interest rate.
This was considered by the judgment as an abusive interest because there is a disproportion regarding the compensation for non-compliance of the consumer with the patrimonial bankruptcy that occurs to the banking entity that has granted the loan.
To which loans does the Supreme Court Judgment of April 22, 2015, apply?
This ruling is therefore applicable to personal contracts concluded with consumers not negotiated individually (*) that have no real guarantee. That is, it is not applicable, for example, to a mortgage loan.
(*) “Not negotiated individually” means that they are governed by general contracting conditions, that is, by conditions that the financial entity – and many other businesses – have in a block and that apply in general to anyone who goes to Take out a payday loan. These are conditions that are not discussed one by one with the bank but you read them and if you want the loan you must sign.
Limitation of interest on late payday loans to two points above the remuneration interest
The judgment has as a practical consequence the limitation of the interest on late payment of payday loans to 2% above the remuneration interest.
In addition, the Supreme Court Judgment has two other important consequences for future lawsuits on this matter:
- First, the judge, where appropriate, should review ex officio and not because of the demand so requests, the interest rate on loan default.
- In the second place, the interest rate of the loan cannot be modulated by the judge, but the clause must be declared void for collecting abusive late payment interests, considered as not being set. What does it mean for a clause to be null? which is considered to have never existed. Therefore, the judge may not set the maximum interest rate but that clause will be directly removed from the contract, and should not replace it because it is not considered an essential clause in the contract.
In this way, all those people who have had to pay an interest rate higher than this for the non-payment of any installment of a payday loan will have the right to claim them from the financial entity, as well as to demand the elimination of said clause of the contract of loan even if they had never been able to pay late interest.
Interest on late payment: What can we claim from the bank?
After this sentence, we can claim two different things, depending on the situation, if we have contracted a loan to the staff with the bank.
In order to verify the interest on late payment applicable to the loan granted to us, we will have to read the loan agreement. If we do not have it, we can request a copy prior to initiating claims for this concept.
On the other hand, and although we know what the interest is for late payment, it is always good to have a copy of the contract in order to name the specific clause that establishes said interest rate.
We have never been late in paying a payday loan fee
If the loan agreement establishes a late payment interest that is more than 2% higher than the loan interest rate, we can contact the SAC and tell you that this clause is void for us to change it and lower the interest rate which contemplates the contract, all this arguing the ruling of this ruling of the Supreme Court.
For this case in which this abusive clause is established in our payday loan contract that has never been applied we can fill in the following model to request the change of that clause that establishes the applicable default interest:
With this model, we will get them to eliminate that clause and if, when the time comes, we are late in paying a loan fee, we are not charged any late payment interest.