1. Legal Framework on Leverage Ethics

A. Ley de Represión de la Usura de 23 julio 1908 - Ley Azcárate
Article 1: "Será nulo todo contrato de préstamo en que se estipule un interés notablemente superior al normal del dinero y manifiestamente desproporcionado con las circunstancias del caso"
Article 3: Consequence = total nullity. Borrower only returns principal, lender loses all interest and fees. Contract remains void, action of nullity is imprescriptible.

B. Responsible Lending Laws

• Law 2/2011 de Economía Sostenible Art 29 + Law 16/2011 de Contratos de Crédito al Consumo: Bank must assess solvency based on income, assets, existing debts. Must act impartially, taking client's personal situation into account.
• Law 5/2019 LCCI - Ley Reguladora de Contratos de Crédito Inmobiliario: Transposes EU Mortgage Credit Directive. Mandatory solvency test, 10-day reflection period, notary must check transparency, ban on tied sales.
• Banco de España Circular 5/2012: Obligation of pre-contractual information (FIPRE, FIPER), APR calculation, transparency of revolving mechanisms.
• Circular 4/2021: Reporting of conduct risk and over-indebtedness indicators.

C. Code of Good Practices
Royal Decree-Law 6/2012, Law 1/2013, Law 25/2015 Second Chance: Protection of mortgage debtors without resources, dación en pago, debt restructuring, and Ley de Segunda Oportunidad for discharge of residual debt.

Ethically, Spanish supervisor in its Supervision Report 2025 lists 4 priorities: responsible lending; embedding consumer protection in corporate culture; payment fraud; oversight of selling practices including bundled sales.

2. Ethics of Leverage - 3 Prohibitions

1. Usurious Leverage: Using a situation of distress/inexperience to impose excessive cost.
2. Opaque Leverage: Revolving credit where capital never amortizes - the client pays interest indefinitely. Considered unethical leverage trap.
3. Irresponsible Leverage: Granting credit without affordability assessment, pushing debt beyond sustainable Debt-to-Income.

3. Landmark Case Laws - The Revolving Credit Doctrine

This is the most litigated ethical issue in Spain.

CASE 1: STS 628/2015, 25 Nov 2015 (Roj: STS 4810/2015) - Pleno - Wizink Case
Facts: Consumer credit revolving from 2001 with APR 24%. Bank: Banco Sygma (later Wizink).
Supreme Court (Pleno) created doctrine: Reference to determine "normal interest of money" is not general legal interest, but average rate in that specific market category published by Banco de España for revolving cards.
Held: 24% was usurious because it doubled the average market rate at the time (around 10-11%). Contract declared void under Art 3 Usury Law. Borrower returns only principal.
Principle: Interest significantly higher than double the normal market = usury. This sentence revived 1908 law for modern consumer finance.

CASE 2: STS 149/2020, 4 March 2020 (Roj: STS 600/2020) - Pleno
Facts: Revolving card with APR 27.24%.
Court refined test: Abandoned "double" rule, said compare with average for revolving product, not all consumer loans. At that time average for revolving was ∼20%. 27.24% was still notably superior.
Held: Usurious. Clarified that normal interest = average for that product category.

CASE 3: STS 367/2022, 4 May 2022 (ECLI:ES:TS:2022:1763) - NON usury
Facts: Revolving card APR 24.5%.
Court held 24.5% was NOT usurious in 2022 context because average market for revolving had risen to ∼19-20%. Differential not enough.
This created confusion in Provincial Courts.

CASE 4: STS 258/2023 of 15 Feb 2023 and STS 262/2023 of 28 Feb 2023 - The 6-Point Rule - Current Doctrine
Plenary resolves mosaic. Supreme Court now fixes objective differential:

A revolving credit is usurious when APR exceeds by more than 6 percentage points the average interest published by Banco de España for that product at time of contract.

Example: If average revolving rate in 2023 was 18.5%, usury threshold = 24.5%. Above that = void. This is binding doctrine now. Court in STS 442/2023 explicitly states 6 points.

Consequence: Borrower returns only capital received, all interest, fees, commissions paid must be refunded with legal interest. CJEU Joined Cases C-698/18 and C-699/18 (2020) confirms restitution action is subject to prescription, but nullity action itself is imprescriptible.

4. Landmark Case Laws - Mortgage Indebtedness

CASE 5: Cláusula Suelo - STS Pleno 241/2013, 9 May 2013
Floor clauses: Clauses that set minimum interest (e.g., Euribor +1% but never below 3%). Supreme Court declared them abusive for lack of transparency if bank did not specifically inform consumer in binding offer about: (a) it is a defining element of price, (b) its economic effect if Euribor falls.
Requirement: Double transparency filter - incorporation + comprehensibility. Result: Banks ordered to refund overpaid interest. Led to Royal Decree-Law 1/2017 extrajudicial return mechanism. Cost to banks: > €4bn.

CASE 6: IRPH Index - CJEU C-125/18 Gómez del Moral Guasch v Bankia SA, 3 March 2020 + STS 2020-2023
IRPH (Índice de Referencia de Préstamos Hipotecarios) - Official index calculated from average of savings banks mortgages. Less transparent than Euribor.
CJEU held IRPH clause must be subject to transparency control under Directive 93/13. National judge must assess if consumer understood calculation method.
Spanish Supreme Court initially said IRPH is not abusive per se (STS Nov 2020), but after CJEU pressure, now says case-by-case assessment: Bank must prove it gave pre-contractual sheet showing evolution of IRPH vs Euribor for last 2 years.

CASE 7: Multi-currency Mortgages - STS 608/2017, 15 Nov 2017
Mortgages in JPY/CHF. Supreme Court declared partial nullity due to lack of transparency on exchange risk. Borrower had to be informed with scenarios: 20% depreciation simulation. Loan converted to Euros.

5. Ethics Compliance Checklist for Spanish Lender

1. Solvency Test: Document DSTI <35-40%, LTV limits. Keep file for Banco de España.
2. APR Test: Check against Banco de España tables monthly. If your revolving product is > Average + 6pp, you are in usury risk.
3. Transparency: FIPRE + FIPER + Notarial Act. For revolving, must explain that minimum payment may not amortize principal (capitalization trap).
4. Second Chance: Before executing mortgage, offer Code of Good Practices restructuring under RDL 6/2012.

Spain's ethical position: Leverage is ethical only if it is affordable, transparent, and not usurious. If any of the three fails, contract is void and bank must bear loss of interest.