In a nutshell, through a recent judgment (No.19597/2020), the United Sections of the Court of Cassation (Sezioni Unite della Corte di Cassazione) clarified in a "definitive" way the relevance of default interest for the calculation of the usurious rate, thus putting an end to the diversity of interpretations, even within the same Court of Cassation. Financial intermediaries are now called to reconsider their internal procedures related to interest rates, to carefully verify the financing contracts currently in progress, to amend standard clauses of new financial contracts, and to defend themselves in possible judicial claims.
This judgment is therefore relevant for all contracts (not only for financing contracts but also for commercial contracts) for which a specific default interest rate is agreed for pecuniary obligations.
The United Sections of the Court of Cassation deal with a legal case which initiated before the court of first instance in 2008 and related to a consumer credit entered into 2002 which was subject of various transfers from the creditor's side, and in respect of which, among other things, the Court of Appeal, declared the invalidity of the clause on interest by virtue of the applicability of Law no. 108/1996 to default interest following the authentic interpretation of Articles 1815 of the Italian Civil Code and 644 of the Italian Criminal Code as a result of Law Decree no. 394/2000.
The appeal before the Supreme Court against the judgment issued by the Court of Appeal was filed by the involved parties and the case was deferred to the United Sections on the applicability of the anti-usury regulations to default interest.
This was because the applicant, inter alia, deemed that the anti-usury regulations are not applicable to default interest since they have " the function of compensating the damage resulting from the delay in performance, they depend on the economic public order and have the role of being a deterrent against non-compliance , and are based on Article 1224 of the Italian Civil Code" and therefore are excluded from the scope of application of the anti-usury regulations (Article 1815 of the Italian Civil Code and Article 644 of the Italian Criminal Code).
In the very end, the default interests would be a penalty and not true interest.
Over time, in fact, there have been different interpretations regarding whether or not to apply the anti-usury regulations to default interests.
In particular, the restrictive interpretation is based, among other things, on both the literal meaning of the words of the law (Article 1815 of the Italian Civil Code and Article 644 of the Italian Criminal Code only refer to the interest payments) and on the different function (and legal cause of the attribution) which is remunerative for interest payments and compensatory for default interests (which compensate the creditor for the loss of money availability never accepted but only suffered).
The extensive interpretation (i.e. the one in favour of the inclusion of the default interest for the calculation of usury) is based both on the different interpretation of the words "for any reason" contained in Article 1815 Italian Civil Code, and on the finalistic interpretation of Law no. 108/1996.
The United Sections, retracing the reasons in support of both arguments, embrace the extensive theory, "so that the debtor has more complete protection" since the protection provided by art. 1384 Italian Civil Code. (i.e. reduction of the excessive penalty) would not be equivalent to the protection provided by the law for usurious interests (i.e. the nullity of the relevant clause).
This judgment requires
– reconsidering financial intermediaries' internal procedures with regard to periodic checks on the interest rates applied and/or applicable;
– a further careful verification for financing contracts currently in progress;
– the amendment to the standard clauses used so far with reference to new contracts to be stipulated in order to control the calculation of the usury threshold.
Finally, the effects of this ruling could also be extended to those contracts already terminated and fully executed, where the debtor sees the possibility of recovering (judicially) part of the sums already collected by the bank.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.