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Loan Shark: the prescription of the action

This article explains why the action that allows a Court to declare the nullity of a contract for having applied loan sharks interest does not prescribe.

We remember that, as a consequence of this, we can obtain or significantly reduce the debt (as in this case: Revolving, loan shark: the negative liquidation ), or cancel the debt and recover money (as in this other case: Revolving, loan shark: the positive liquidation ).

The action does not prescribe

The position of the Supreme Court

In 2015, the Supreme Court issued judgment No. 628, of November 25 (Id Cendoj: 28079119912015100038), in which it established the following:

“FOURTH.- Consequences of the loan sharks nature of the credit.

1.- The loan sharks nature of the “revolving” credit granted by Banco Sygma to the defendant entails its nullity, which this Chamber has described as “radical, absolute and original, which does not admit confirmatory validation, because it is fatally irremediable, nor is it susceptible of extinctive prescription » judgment no. 539/2009, of July 14.

2.- The consequences of such annulment are those provided for in art. 3 of the loan shark Repression Law, that is, the borrower will be obliged to deliver only the amount received.”

And if we analyze the judgment above No. 539, of July 14, 2009, issued by the Supreme Court (Id Cendoj: 28079110012009100514), we can verify that, since that date, the Supreme Court defends the following:

“The nullity of the loan sharks, clearly established by article 1 of the Law of July 23, 1908, entails a radical, absolute, and original inefficiency of the business, which does not admit confirmatory validation, because it is fatally incurable, nor is it susceptible to extinctive prescription.

Said nullity affects the entire agreement with the only consequence, established in article 3, that the situation must go back to the moment immediately before the loan, which determines that the borrower must repay the amount received without having to any established term for such return must be taken into account, since its setting is included in the absolute and total ineffectiveness of the agreement, which entails the consequence that, even in the hypothetical case raised by the appellant that urges the annulment of the loan before the deadline is met, the return by the borrower of the amount received must be immediate.”

The position of the Provincial Courts

The Provincial Courts are following the jurisprudence established by the Supreme Court. Although there are indeed some Courts that understand that the restitution action is subject to a term, the majority criterion is the one that establishes that in the liquidation to be carried out, they must all loan sharks interest unduly charged (as well as the rest of commissions, insurance, and other expenses paid) must be taken into account.

Among others, we can cite the following sentences:

Judgment of June 30, 2021, issued by the Provincial Court of Seville (Cendoj ID: 41091370022021100275):

“Lack of motivation should not be confused with succinct but sufficient motivation. This assumption, the nullity of the contract has been determined by the proper application of the Azcárate law, on the repression of loan sharks, of July 23, 1908, so that the action to declare the radical or absolute nullity of the contract object of litigation it is imprescriptible, which determines the inadmissibility of expiration as an extinctive cause of the exercised action ”.

Judgment of October 22, 2020, issued by the Provincial Court of Bilbao (Id Cendoj: 48020370052020100069):

“ The consideration of the imprescriptibility of the action for the nullity of a contract subject to the loan sharks Law is declared, without a doubt, by the sentence of the Plenary Session of the First Chamber of the Supreme Court, of November 22, 2015 “The character loan sharks of the “revolving” credit granted by Banco Sygma to the defendant entails its annulment, which this Chamber has described as “radical, absolute and original, which does not admit confirmatory validation, because it is fatally irremediable, nor is it subject to extinctive prescription” judgment no.

539/2009, of July 14 ”.

Judgment of April 15, 2021, issued by the Provincial Court of Coruña (Cendoj ID: 15030370052021100118):

“The loan sharks declaration entails radical or absolute and original nullity, not validating but irremediable, and not susceptible to extinctive prescription (STS of July 14, 2009, and the Plenary of November 25, 2015). The consequences of such annulment are provided for in article 3 of the loan sharks Repression Law: “the borrower will be obliged to deliver only the amount received; and if he had paid part of it and the overdue interest, the lender would return to the borrower what, taking into account the total amount received, exceeds the borrowed capital.”

Judgment of July 14, 2021, issued by the Provincial Court of Melilla (Cendoj ID: 52001370072021100109):

  • “We consider, therefore, that, once the contract has been declared null and void, it is not possible to set a time limit on the restitution based on the time that has elapsed since it was signed, which seems more in line with the terms in which the Supreme Court ruled in the cited judgment No. 539/2009, of July 14 ”