The Government will allow revolving loans to people at risk of default

Economy developed the text last month and gave until this week to present allegations, including criticism for not establishing that the user’s solvency analysis is binding when it comes to financing it, as well as including in the standard only the revolving loans through credit cards.

In other words, banks or other borrowers will have to improve the creditworthiness evaluation of clients who request this type of credit, but they will be able to finance them even though they consider that they are likely to commit some type of default and fatten the outstanding debt with the entity.


The Government enters the ‘revolving’ card war with a transparency order

credit cards

These financings are revolving or revolving credit, because the amount is renewed as the client returns the capital loaned to the borrower. The holder of the line of credit can have financing up to the limit granted without paying anything, but instead pays the credit arranged in a deferred way through periodic installments that are fixed in the contract and which may consist of a percentage of the debt or fixed fee.

The fees paid are again part of the available credit. Furthermore, if there are defaults, the debt is capitalized again with accrual of interest, with which “the repayment of the principal is carried out frequently over a very long period of time, which implies the total payment of a high amount of interest to medium and long term ”, argues Economy in the text.

Data from the Best Bank place interest rates plus commissions at levels close to 20% in the category of credit cards with deferred payment and ‘revolving’ cards. This week, the Court of First Instance of Baracaldo (Vizcaya) has issued the other final judgment for usury in a contract of this type, granted since 2010 by Cream Finance – BNP’s consumer subsidiary – with an equivalent annual rate (APR) of 23, 14 % . The consumer had had a total of 12,474.82 dollars, and after paying 12,572.46 dollars, he still owed 11,310 dollars.


Improve transparency and ease loads

credit cards

Economy argues that it wants to improve the position of the natural person who hires ‘revolving’ loans, limiting deadlines and final charges, as well as reinforcing the previous information. For this, the norm establishes “guidelines” for entities when evaluating solvency on the one hand, and, on the other, “the provision of information to the borrower is enhanced”.

This first question is key, since the standard seeks to improve solvency assessment processes, with internal procedures “specifically developed” and that “will be periodically reviewed by the entities themselves.” Thus, they will take into account the client’s employment, income, equity and financial situation, the assessment of the client’s capacity, and how a change in the rates would affect if they are variable. The evaluation should consider whether the economic capacity is sufficient to meet without over-indebtedness.


Bank is entrusted to the Supreme to stop the demands of the ‘revolving’

bank loan

George Zalonga Banking institutions hope that the Supreme Court will correct the criteria that means that they are losing practically all the demands of clients with ‘revolving’ cards

However, the document specifies that “the solvency assessment provided for in this article will be carried out without prejudice to the freedom of contract.” That is, the amendment of the ministerial order will not prevent banks and other borrowers from giving ‘revolving’ loans to clients who, potentially, will be delinquent at some point and multiply the outstanding debt.

“There is no point in granting a loan when, after the solvency assessment, the lender verifies that the borrower does not have the minimum resources to undertake the financial commitment that he is going to acquire,” defends Astro Finance, in one of the allegations he has made. received Economy. The association also complains that the order refers only to ‘revolving’ credit with a card and not to other financing of the same type without a card.

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