Usury standard in financing on the alternative credit market

Application of “normal interest rate” doctrine

In Judgment 754/2026, of May 18, 2026, the Spanish Supreme Court clarifies how usury should be assessed in mortgage loans granted by non-banking companies. Specifically, the ruling addresses how the Court’s established case law on the “normal interest rate” standard under Act 1908 of July 23, on the nullity of usurious loan contracts (known as the “Azcárate Act”) applies to these types of loans.

The case analyzed two commercial mortgage loans granted by a non-banking institution to a company, which were short term, and had a business purpose, a yearly fixed interest rate of 15% and an APR of 18.21%.  

The Madrid Court of Appeals considered the contracts usurious after comparing them with statistics of interest rates published by the Bank of Spain under its Circular 4/2002, of June 25.  Specifically, this comparison criterion showed that the APR of the disputed loans was six times greater than the annual rate established in the corresponding table of those statistics.

The Supreme Court corrects this criterion and highlights that the comparison must be carried out with a homogeneous group of transactions. When the lender is a professional company subject to Act 2/2009, of March 31, on mortgage credit contracts and intermediation services, the benchmark for comparison does not necessarily have to be that of the credit institutions, rather it should be that of the alternative credit market governed by that act.

Grounds of the decision 

We highlight the following arguments behind the judgment:

• Scope of application of Circular 4/2002: This Bank of Spain ruling limits the scope of application to "credit institutions" and incorporates a series of rules and calculation criteria specific to the banking activity.
• Bank interest rates: In the loans granted by the credit institutions, the average interest rate is determined by bank-specific factors, such as the sale of bundled products with interest-rate discounts, access to low-cost financing (interbank market and ECB), the legal requirement for solvency ratios and economies of scale from taking deposits from the public.
• Existence of a differentiated financial market segment: There are companies on the credit market that are professionally engaged in granting mortgage financing and they are subject to the general civil, commercial, mortgage and consumer law framework, and specifically to the provisions of Act 2/2009, which establishes a register of these companies. The mentioned register prepared statistics about the interest rates on real estate loans in the market segment governed by Act 2/2009. 
• Alternative credit market rates: The usual rates for money in the non-bank market are generally higher, mainly due to the higher risk of the transactions.
  
  In the case at hand, on the dates the loans were granted, the rates recorded in the register regulated by Act 2/2009 stood at 16.79%, with a standard deviation of 4.54%. Therefore, in line with this comparison criterion, the remunerative interest on the loans is not “significantly higher than the normal cost of money”.
  
  
• Consideration of the circumstances of the case: Also, other circumstances of the case must be considered, including the extensive prior negotiations, the purpose of business financing for debt refinancing, the delivery of a binding offer and the qualified profile of the borrowing company's administrator.

Practical impact for non-banking lenders

For the non-banking lenders, the analysis of usury continues to apply, although with a more precise approach: the comparison criteria must be adjusted to the economic reality of the alternative financing segment in which they operate.

The judgment also confirms that nullity on grounds of usury has severe consequences: if nullity is declared, the borrower must only return the capital received, and the lender must repay any amounts received in excess of that principal amount. Therefore, the proper justification of the cost of credit and of the risk assumed will continue to be essential in these types of transactions. 

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