Revolving credit accounts for more litigation than any other retail credit product in Spain: usury, transparency review, periodic information and credit limit reviews. We adapt your institution’s contract, documentation and processes so that your portfolio holds up.
Review of your revolving credit agreement
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Six workstreams on the same product: the contract, the information provided before signing, the information sent each month, pricing, credit limit reviews and the defense when a claim arrives.
In a revolving credit product, it is not enough for the interest clause to be in the contract: the average customer must be able to understand its real economic burden. We rewrite the terms and conditions so they pass the two-step incorporation and transparency test.
The critical point of the product is that customers understand how long it will take them to pay off the debt if they pay only the minimum payment. We design the representative examples and simulations that the regulator expects to see before the contract is signed.
Analysis of the rate applied against the average rate published by the Bank of Spain for this category of credit, with a documented, regularly reviewed pricing policy that can withstand judicial scrutiny.
Statements, alerts when the payment does not significantly reduce the principal, and notice of any change to the credit limit or interest rate. We define the schedule, the content and the proof of sending.
Raising the available credit based on customer tenure or usage, without looking at repayment capacity again, is the practice that generates the most claims. We design the review cycle and the criteria for not raising limits.
When claims arrive in batches, a case-by-case response does not scale. We set criteria for conceding, settling and defending claims, and we prepare the documentary support for each option.
The legal risk of a revolving credit product varies with who issues it, how it is sold and how old the portfolio is. Legacy exposure usually weighs more than the new contract.
"You can have had flawless terms and conditions since last year and still be exposed through contracts signed a decade ago, with pre-contractual documentation you would not defend today. The review must start with the live portfolio, not with the new product."
"What decides most lawsuits is not the interest rate itself, but whether the customer could understand that, by paying the minimum, the principal barely goes down. That is proven with the example shown to them before signing."
"When the contract is signed at a counter or on a phone in two minutes, the burden of proving that the pre-contractual information was provided and that the customer could read it falls on the issuer, and it is usually the weakest link."
"In a digital-native product, transparency is won or lost in the interface: what is visible without expanding anything, what takes an extra click and what record is kept of what the user saw. Perfect terms and conditions will not save a badly designed screen."
The current revolving credit regime was not built in one go: it is the result of a 1908 law, two waves of case law and a specific transparency rule.
The law that is still deciding lawsuits more than a century later. It allows a loan to be declared void when its interest is notably higher than the normal interest rate and manifestly disproportionate to the circumstances of the case. Its consequence is drastic: the borrower repays only the principal.
Two judgments set the course: first, the Court accepts that the Usury Act applies to this type of credit; then, it specifies that the benchmark is neither the statutory interest rate nor the rate for consumer credit in general, but the average rate for transactions in this specific category published by the Bank of Spain.
Spain approves a ministerial order on revolving credit that strengthens three things: prior information with representative examples, periodic communication during the life of the contract, and the duty to warn customers when the payment they have chosen barely reduces the principal.
The Supreme Court sets a quantitative criterion for determining when a rate is notably higher than normal. This brings the predictability the sector had been asking for and shifts the debate from price to the transparency test.
The EU consumer credit reform adds specific obligations for this product: periodically reviewing the credit limit granted, alerting consumers when their balance is not going down, and offering faster repayment options.
The consequences are not proportionate to the defect: a transparency problem in the standard terms affects every contract signed on that template, not just one.
Nullity for usury: if the rate is held to be notably higher than normal and disproportionate, the contract is declared void and the customer only has to repay the principal drawn down, and everything charged above that amount must be refunded.
Nullity of the clause for lack of transparency: even if the rate is not usurious, the interest clause can be struck down if the customer could not understand its real economic burden. The usual effect is that the contract remains in force with no interest on the principal.
Portfolio effect: the defects lie in the standard terms and in the sales process, not in the individual contract. An adverse judgment on one contract template anticipates the outcome for every contract that uses the same template.
Failing to warn customers, with a clear example, that by paying only the minimum the debt can drag on for many years is today the most effective argument against the issuer in court.
Beyond the outcome of each lawsuit, the aggregate cost of defense, court costs and interest in a mass-claims scenario can exceed the margin the product has earned over years.
The reports of the supervisor’s complaints service identify patterns by institution and by product. An unusual volume of complaints about this product draws attention to all of your retail lending operations.
We review the contract, the pre-contractual documentation, the examples shown before signing and the periodic information, and we tell you which part of your portfolio is exposed and why.
It is a form of consumer credit with a credit limit that replenishes as the customer repays. Unlike a term loan, there is no fixed repayment schedule: the customer draws down funds, pays an installment and has credit available again.
It is usually offered through credit cards and credit lines linked to point-of-sale financing. Its flexibility is its commercial advantage and, at the same time, the source of almost all of its legal problems.
Because of a combination of three factors that do not occur together in any other retail product:
The result is a product where claims do not arrive one by one, but in batches.
The 1908 Usury Act sets two cumulative requirements: the interest must be notably higher than the normal interest rate and manifestly disproportionate to the circumstances of the case.
Case law has made clear that the benchmark is the average rate for transactions in this same category published by the Bank of Spain, not the statutory interest rate or the rate for consumer credit in general. More recently, it has set an objective margin beyond which that threshold is deemed to be exceeded, which has given the sector predictability.
The consequence is the nullity of the contract, not simply a reduction of the interest. The borrower only has to repay the principal actually drawn down, and the lender must refund everything received above that amount: interest, fees and linked insurance.
This is a far more severe consequence than that of a lack of transparency, which is why the pricing policy deserves a documented, periodic review.
Spain’s product-specific rules strengthen periodic information: statements detailing drawdowns, interest and fees, and an express warning when the payment amount chosen does not significantly reduce the principal.
They also require advance notice of any change to the credit limit or terms. And the EU consumer credit reform adds a periodic review of the credit limit granted and the duty to offer alternatives to customers whose balance is not going down.
It is a common and highly exposed practice. Raising the available credit based on tenure, good payment behavior or automatically, without reviewing the cardholder’s current repayment capacity, is hard to defend against a claim.
The practical recommendation is simple: every significant credit limit increase must be backed by a documented reassessment of repayment capacity, with the same traceability as the initial approval.
With an inventory of historical terms and conditions. Almost no institution has a clear map of how many contract versions coexist in its live portfolio, since when each one was used and what pre-contractual documentation came with it.
That inventory lets you segment the exposure and make informed decisions on where to defend, where to settle and which contracts to renew on new terms. Without it, litigation strategy is improvised claim by claim.
The defense of a revolving credit product is built in three layers: the price charged, the understanding created before signing, and the evidence that both happened. Failing at any one of the three leaves the portfolio exposed.
Regularly compare your rate with the average rate published by the Bank of Spain for this category, keep a written record of the comparison and of your pricing criteria, and set a review procedure for when the benchmark moves.
The decisive element is the simulation showing what happens if the customer pays only the minimum: the total amount paid and the time until the debt is repaid. It must be visible without expanding anything, on the same medium where the contract is signed, and it must be recorded.
For online sign-up, keep the version of the screen, the time of acceptance and the document provided. At the point of sale, keep a dated acknowledgment of receipt of the pre-contractual documentation. Without this, the burden of proof works against you.
If you need to review your product or portfolio, see our fintech regulation services or request a free consultation.
When a claim arrives, the dispute is always about the same five pieces: the price, the clause, what was shown before signing, what was communicated afterwards and what evidence the issuer keeps. This section goes through them one by one.
1) PriceThe comparison is not made against the statutory interest rate or consumer credit in general, but against the average rate for this specific category published by the supervisor. Documenting that comparison is cheap; not having it is expensive.
2) ClauseTwo different filters. The first asks whether the clause validly became part of the contract; the second, whether the customer could understand what it cost them. Passing the first and failing the second is the most common scenario.
3) Life of the contractThe statement is not an administrative formality: it is evidence of diligence. It must let customers see how much they have paid, how much principal they have repaid and what happens if they keep the current payment.
4) The example that decides everythingIf there is one element worth getting exactly right, it is this one: a representative example showing, with specific figures, how much the customer will end up paying, and over how long, if they pay only the minimum. It must be there before signing, on the same medium, without having to expand or download anything, and there must be a record that it was shown. It is the difference between a defensible product and an exposed portfolio.
Map of consequencesNullity of the contract. The customer repays only the principal drawn down, and the issuer refunds everything charged above that amount.
Nullity of the interest clause. The contract survives, usually with no interest on the principal lent.
A transparency breach with administrative consequences, and evidence that counts against the issuer in the civil lawsuit.
Requires a minimum payment simulation: customers cannot work out the real repayment period or the total amount on their own.
The fixed repayment schedule already shows the total payable and the number of installments. Understanding is immediate.
Initial and periodic. Available credit replenishes and the limit can be raised, so the initial analysis goes out of date.
Ends at approval, unless the loan is novated or refinanced.
Periodic statement with a warning if the principal barely goes down, and advance notice of changes to the limit or terms.
Information on the status of the loan and notice of changes, without the insufficient-repayment alert.
High: the rate is compared with the specific benchmark for this category, which is notably higher than the benchmark for term credit.
Lower in practice, although the same test applies, with its own market benchmark.
High and correlated: the defects lie in the standard terms and affect all contracts at the same time.
More contained, unless there are systematic defects in the contract template or in the pre-contractual documentation.
If you recognize two or more of these situations, it is worth opening a portfolio review before the first adverse judgment sets the timetable for you.
These terms appear in lawsuits, expert reports and requests from the complaints service. Your product, risk and legal teams should use them with the same meaning.
A form of credit in which the limit granted replenishes as the customer repays, with no fixed repayment schedule. It is mainly offered through credit cards and lines linked to point-of-sale financing.
The lowest amount the customer can pay each month. When it is close to the interest accrued, the principal barely goes down and the debt drags on for years. It is at the heart of the transparency debate.
The test under the 1908 Usury Act, with two cumulative requirements. Its consequence is the nullity of the contract, not a reduction of the rate.
Official statistics on the rates institutions apply to each category of transaction. It is the benchmark the courts use to assess whether a rate is notably higher than normal.
An examination of whether the consumer could know the real economic and legal burden of the contract. It is separate from, and independent of, the incorporation test, which only looks at whether the clause validly became part of the contract.
An increase or reduction of the credit granted. It requires advance notice to the customer and, for significant increases, a documented reassessment of their repayment capacity.
A document detailing drawdowns, interest, fees and the outstanding balance. Spain’s product-specific rules also require a warning when the payment chosen does not significantly reduce the principal.
The set of general terms and conditions used in a given period. Identifying how many versions coexist in the live portfolio is the first step in any serious defense strategy.
Insurance, drawdown fees or management fees linked to the credit. Their cost must be included in the total cost information, and they cannot be presented as mandatory if they are not.
REGULATORY CONTROL CENTER · REVOLVING CREDIT
Not every contract in a revolving credit portfolio is equally exposed. Combining the age of the terms and conditions, the sales channel and the rate applied lets you segment the risk and prioritize the review.
An indicative guide for prioritizing the review: where to act first and which segments can wait.
Tell us which revolving credit product you market and since when, and we will tell you where we would start the review of your portfolio.
Few retail financial products concentrate as much legal tension as revolving credit. Its regime does not come from a single rule, but from the overlap of a 1908 law that remains fully in force, a body of case law built over the last decade and a specific transparency rule adopted in Spain for this particular product.
The Usury Act allows a loan to be declared void when its interest is notably higher than the normal interest rate and manifestly disproportionate to the circumstances of the case. What sets revolving credit apart is that its rates are structurally far above those of fixed-term consumer credit, which has forced the courts to specify the correct benchmark: not the statutory interest rate, nor consumer credit in general, but the average rate for this specific category published by the Bank of Spain.
As the usury criterion has become more objective, the dispute has shifted to the substantive transparency test. The question is no longer how much the credit costs, but whether the consumer could understand the economic burden they were taking on. The decisive point is nearly always the same: whether they were told, with a specific example and before signing, how much they would end up paying, and for how long, if they paid only the minimum.
In 2020, Spain approved a ministerial order on this product that strengthens three areas: pre-contractual information, with representative examples of different payment scenarios; periodic information during the life of the contract, including an express warning when the payment chosen does not significantly reduce the principal; and the assessment of repayment capacity, both at approval and when the limit is raised.
The EU consumer credit reform introduces additional obligations specific to open-ended and revolving credit agreements: periodic review of the credit limit granted, alerts to consumers whose balance is not going down, and the duty to offer them faster repayment options. For Spanish issuers, this comes on top of what national rules already require rather than replacing it.
With the inventory of terms and conditions. Before discussing litigation strategy, you need to know how many contract versions coexist in the live portfolio, how many contracts sit under each one and what pre-contractual documentation came with each version. That map lets you segment the exposure and make informed decisions on where to defend, where to settle and which contracts to renew. Without it, every claim is answered as if it were the first.
Key legislation, linked to the official text:
Legislation and links reviewed in .