Analysis and determination of usury practice
Default interest rate used in vehicle financing can be used in usury analysis
Maturity date of promissory notes

This update examines three recent court precedents concerning financial transactions.

Analysis and determination of usury practice

In July 2017 a collegiate circuit court issued a non-binding precedent(1) that broadened the scope and source of information that judges should use to analyse and determine the existence of usury, as observed under Article 21(3) of the American Convention on Human Rights (also known as the Pact of San Jose, Costa Rica). The precedent states that judges must:

  • consider the simultaneous accrual of both ordinary and default interest rates to determine whether they constitute usury collectively (in addition to analysing each accrual individually); and
  • reduce both interest rates to a prudent rate in the affected party's favour pursuant to the guidelines provided in earlier Supreme Court precedents.

In other words, pursuant to this precedent, a judge can determine that an ordinary interest rate and a default interest rate do not constitute usury when considered individually, but do so when considered together.

This non-binding standard stems from two earlier precedents that:

  • recognised the existence, severability and validity of ordinary and default interest rates; and
  • provided that the usury prohibition applies to both ordinary and default interest rates.

Default interest rate used in vehicle financing can be used in usury analysis

Another recent non-binding collegiate circuit court precedent(2) validated judges' authority to use the annual interest rate published by companies that engage in vehicle financing to determine whether the default interest rate set out in a promissory note used as collateral in such financing is excessive or constitutes usury.

In addition, judges may consider elements such as:

  • the nature of the parties' relationship;
  • the financial position of the parties covered by the promissory note and the legal framework applicable to the creditor's activity, if any;
  • the financing's purpose;
  • the interest rates used by banks in comparable transactions;
  • the variation of the national inflationary index during the financing term; and
  • market conditions, including circumstances particular to the scenario in question, as well as other concurrent factors and recommended indicators.

As regards market conditions, judges have traditionally turned to:

  • financial indicators published by the Mexican Central Bank and the Financial Users' Protection and Defence Commission; and
  • the total annual cost of the financing, which was usually considered the financial indicator that could provide the most certainty in terms of analysing usury.

To the extent that a judge's use of the new financial indicator is duly justified and grounded with regard to the case in question, he or she is also likely to include some of the above elements, including:

  • the nature of the parties' relationship;
  • the creditor's activity; and
  • market conditions.

This precedent is notable, as it marks a distinction between the traditional banking industry and the automobile financing industry and may be used as the basis for different rules applicable to each.

Maturity date of promissory notes

Finally, the First Chamber of the Supreme Court issued a binding precedent(3) which states that when a promissory note includes no specific maturity date (ie, it includes the month and year of maturity, but not the date), the note will be enforceable on the same date on which the note was issued in the maturity month and year set out in the note. According to the precedent, if such maturity month does not have a date which corresponds to the issuance month (eg, the maturity month is February, but the issuance date was the 31st), the note will mature on the last day of the maturity month in the applicable maturity year. The rationale for this is that it preserves the functional value of the note and its negotiability, which is a key aim in light of the legal void that such notes are intended to fill. Notably, as this precedent was issued by the highest Mexican judicial body, it is binding on all other Mexican judicial bodies.

For further information on this topic please contact Federico de Noriega Olea, Maria Aldonza Sakar Almirante or Juan Pablo Vargas at Hogan Lovells BSTL by telephone (+52 55 5091 0000) or email ([email protected], [email protected] or [email protected]). The Hogan Lovells website can be accessed at


(1) Thesis: (V Region) 1o.3C(10a); Collegiate Circuit Courts; Registration 2015943, Isolated Thesis, Usury, "The Judge Must Analyse if the Simultaneous Generation of the Ordinary and Moratorium Interests Can Constitute a Usury Interest and, Where Appropriate, Reduce them Prudently, According to the Guidelines Established by the First Hall of the Supreme Court of Justice of the Nation in the Thesis of Jurisprudence", 1a/J 46/2014 (10a) and 1a/J 47/2014 (10a). Direct Amparo 228/2017 (Auxiliary Notebook 557/2017) of the index of the Collegiate Court in Civil and Administrative Matters of the 13th Circuit, with support from the First Collegiate Circuit Court of the Auxiliary Centre of the Fifth Region, Culiacan, Sinaloa. Misael Ávila Herrera. July 6 2017. Unanimity of votes. Speaker: Gustavo Almendárez García; secretary: Silvia Huerta Sánchez.

(2) Thesis: I.8o.C.47C(10a), Collegiate Circuit Courts, Registration 2015991, Isolated Thesis, Usury, "To Determine Whether the Moratorius Interest Pacted in a Payment Subscribed as a Warranty in an Automotive Financing is Excessive, it is Valid to go to the Rate Published by Companies Dedicated to that Range Specifically". Direct Amparo 736/2017. Self-Financing Mexico, SA of CV. November 9 2017. Unanimity of votes. Speaker: Ma del Refugio González Tamayo; secretary: José Antonio Franco Vera.

(3) Thesis: 1a./J. 54/2017 (10a), First Chamber, Supreme Court, Registration 2015375, Jurisprudence, "I Will Pay When it Contains, as a Period of Payment, the Indication of a Determined Month and Year, Without Requiring an Exact Day, by General Rule, the Day of its Subscription Applied to the Month Shown for the Payment". Contradiction of Thesis 175/2016. Second Collegiate Circuit Court of the Auxiliary Court on Civil Matters of the Third Circuit. February 22 2017. The voting was decided in two parts: a majority of four votes for the competition. Dissident: José Ramón Cossío Díaz. Unanimity of five votes of Ministers Arturo Zaldívar Lelo de Larrea, José Ramón Cossío Díaz – who reserved his right to formulate a concurring vote – Jorge Mario Pardo Rebolledo – who reserved his right to formulate a concurring vote – Alfredo Gutiérrez Ortiz Mena and Norma Lucía Piña Hernández, in terms of the background. Speaker: Arturo Zaldívar Lelo de Larrea; secretary: Mario Gerardo Avante Juárez.