Those affected by revolving cards are always on the lookout for news regarding the references used by judges in order to take them into account in claims for abusive interest.
A few dates ago, the Bank of Spain (BdE) made some nuance in the statistics of the use of the average of the TEDR (Effective Rates of Restricted Definition) in Spanish territory: “The purpose of the TEDR rates is basically to provide the Eurosystem with relevant information for the analysis of the transmission of monetary policy but they are not, unlike the APR rates, an adequate or comparable reference of the total cost for the clients of the financing granted”, he explained.
What’s up with this? It is a paradigm shift, since now the judges will take into account the TEDR when making their judicial rulings regarding revolving cards. It is a fundamental aspect for the result of the numerous lawsuits over revolving cards that collapse the Spanish courts.
In fact, it is estimated that there may be between 150,000 and 200,000 demands from users of this type of credit card that allow deferred payment of purchases. Likewise, the objective of this clarification is to prevent many courts from mistakenly comparing, as they have been doing to date, the TAE (annual equivalent rates) with the TEDR to determine if the price of a revolving card has usury characteristics.
But going to the concept, it is worth mentioning how the TAE differs from the TEDR. The latter are, by definition, lower than the APR. For this reason, in the TEDR comparisons against the TAE there is usually more difference than if TAE were compared with TAE. Although they may look similar, the difference is noticeable.
In this sense, the average TEDR is calculated for monetary policy purposes and, therefore, cannot be used as a market reference. Similarly, the APRs are configured to provide transparency around market prices.
For example, financial institutions are required to report the APR of their products on a quarterly basis under transparency circular 5/2012 to the Bank of Spain. They must also inform about the APR in the advertising in which reference is made to the cost, in the contracts they formalize with their clients, in the binding offers and in the settlement documents. This is, then, the market reference that consumers know and understand.
An example would be that banks are obliged to report the APR of their products on a quarterly basis under transparency circular 5/2012 to the Bank of Spain.
They must also inform about the APR in the advertising in which reference is made to the cost, in the contracts they formalize with their clients, in the binding offers and in the settlement documents. This is, therefore, the reference element of the market that consumers know and understand.
Entering into more differences, the TEDR does not include related expenses, such as premiums for amortization insurance, nor the commissions that compensate direct related costs. However, the APRs measure the annualized interest rate of a credit operation taking into account the nominal interest rate (TIN), the frequency of payments (monthly, quarterly, etc.) and the commissions and expenses of the operation.
The latest rulings of the Supreme Court of May and October 2022 already endorsed that the usual interest rates for revolving cards ranged between 23% and 26% between 1999 and 2009 and, thus, they could not be considered as users.
Thus, with the clarification of the Bank of Spain, from now on, the parties will have to provide evidence of normal or customary market prices at the time of contracting the card in question.
They will have to look for other comparison formulas, such as the individual APRs of banks and credit institutions, which are also published by the BdE itself on a quarterly basis and which solve much of the legal chaos created around these abusive products.
