Spain Moves to Cap Abusive Interest Rates on Consumer Credit Amid European Directive
Spain plans strict new regulations to limit abusive consumer credit interest rates, following an EU directive targeting predatory lending in revolving credit cards and microloans.
- • Spain is finalizing regulations to cap abusive consumer credit interest rates, including those exceeding 1,000% APR on revolving cards.
- • The new law will regulate and supervise all consumer credit providers, extending protections to vulnerable borrowers.
- • Spain missed the initial EU directive deadline but aims to enact the law by November 2026.
- • The Supreme Court’s 2023 benchmark defines usury as rates over the market average plus six percentage points.
- • Precontractual disclosure requirements will enhance transparency, requiring documents 24 hours in advance.
Key details
The Spanish Ministry of Economy is finalizing crucial regulations to impose limits on abusive interest rates charged in consumer credit, particularly targeting revolving credit cards and microloans. Interest rates for such products have reportedly reached astronomical levels, with revolving cards sometimes exceeding 1,000% when consumers default, while some credit offers have hit 3,000% APR. This new regulatory effort aligns Spain with a European directive designed to protect consumers from predatory lending practices by mandating all consumer credit providers be regulated and supervised.
Carla Díaz Álvarez de Toledo, General Director of the Treasury and Financial Policy, revealed that the government will soon present a draft law transposing this European directive. The legislation will introduce Spain’s first ever explicit limits on credit pricing to prevent exploitation, focusing on vulnerable consumers who often turn to high-interest loans after traditional bank denials. The law broadens the scope of consumer credit rules to loans up to €100,000 and establishes stricter registration and authorization requirements for lenders, aiming to increase transparency and strengthen consumer protection.
Spain has missed the original November 2023 deadline to transpose the directive, but the law is expected to come into force by November 2026. The Supreme Court’s 2023 ruling, setting usury benchmarks as interest rates exceeding the average market rate plus six percentage points, will underpin the new limits. The government is considering methods to cap abusive interest either through absolute ceilings or market-linked formulas. Additionally, the reforms will require lenders to provide essential precontractual information 24 hours before consumer commitment, ensuring informed decision-making.
This comprehensive approach addresses concerns about the growing digital lending market, which previously operated with minimal oversight, enabling exorbitant interest charges and fees. By enforcing regulation and supervision uniformly, the Spanish government aims to harmonize protections across the dynamic consumer credit landscape while responding to European mandates.
This article was synthesized and translated from native language sources to provide English-speaking readers with local perspectives.
