The Civil Chamber of the Supreme Court has upheld the cassation appeal filed by the Financial Users Association (ASUFIN) against Carrefour's financial services for distributing 'revolving' cards to its customers, even at the checkout and with a link to the retail chain. The association considers victory assured as no further appeal is allowed and is now gathering information from all affected parties to process the refund of the interest charged. "These amounts (interest) will depend on each client's credit commitments, which can double or triple the amount borrowed," explained in a statement sent to the media this morning.
According to ASUFIN's calculations, around one and a half million cards have been distributed since 2019 with a credit balance of up to ¤3 billion. "It is a loyalty card that provided credit at the supermarket checkout, without explaining the consequences and irresponsibly indebting its customers," the organization claims. They argue that selling a 'revolving' card at the checkout prevented proper explanation of this consumer credit product, considering its high interest rates and the prolonged debt repayment period.
They also denounce that Carrefour used this card as a loyalty tool, as "being a Carrefour club member rewarded with an additional 1% on certain transactions," they state.
The lawsuit, filed in June 2020, was initially dismissed and later appealed by ASUFIN. Now, the Supreme Court sets a precedent on a specific aspect of the 'Carrefour Pass' card contract, determining whether "the clause establishing an interest rate" APR (annual percentage rate) of 21.99% "is transparent (...) and, if not, whether it is abusive." It relies on previous judgments and the jurisprudence of the Court of Justice of the European Union.
The ruling refers to the "snowball effect" definition used by the Bank of Spain to describe the financial consequences of using 'revolving' cards, "the risk of being chained to an indefinite debt that never ends," as explained by the Civil Chamber in its document. According to the Court, Carrefour's practices regarding the Pass card did not provide sufficient advance, clear, and understandable information to make customers aware of the risks. Therefore, its commercialization is deemed non-transparent, and ASUFIN's cassation appeal is upheld.
'Revolving' cards, traditionally distributed by banks and financial institutions, are considered high-risk for consumers due to their very high interest rates and the prolonged debt repayment period.
This leads to two consequences: "firstly, if the monthly payment is very low, it is practically impossible to repay the debt, no matter how small it is. Secondly, it is impossible to predict how the debt will be repaid because it is renewed periodically."
The latest data available as of December show that "the volume requested through 'revolving' cards amounts to ¤10.816 billion. The average interest rate is 18.32%, nearly three times the average APR of consumer loans, which is around 6.5% in our country."