The Joined Chambers of the Court of Cassation, in their judgement of 19 october 2017, take position on the relevance of “supervening usury” after the conclusion of the contract, when the agreed rate of interest exceeds the interest rate threshold (laid down by Law 1996 n. 108, Anti-usury Law) after the conclusion of the contract, during the contractual relationship.
The Court of Cassation ruled on the possibility that the rate of interest – agreed before the entry into force of Law 108/1996, and exceeding the interest rate threshold after that Law – could be considered invalid or ineffective; at the same time, the Court considered the circumstance in which the rate of interest, agreed by the parties within the interest rate threshold, exceeds it during the contractual relationship.
In the present case:
- the claimant concluded a ten-years mortgage in 1990, with an interest rate which, after the application of anti-usury regulation (pursuant to Law 108/96), exceeded the interest rate threshold;
- during the judgement, the claimant asked the invalidity of the interest clause, the restitution of the interest already payed, or anyway, the restitution of the payment exceeding the interest rate threshold, and the damages for the offence commited by the bank, who also refused to renegotiate the interest rate, despite the entry into force of L. 108;
- the judgement of the Court of Milan, which condemned the Bank, was reformed by the Appeal Court, according to the fact that, in the opinion of the Court, a real estate mortgage loan should not be submitted to L. 108/1996;
- the Court of Cassation – after ruling the applicability, in general, of the usury control established by L. 108 also to the mortgage loan – referred the case to the President of the Court, to assign to the Joined Chambers the question regarding the impact of the regulation of usury on contracts concluded before the entry into force of L. 108/1996, and on the other hand, on contracts exceeding the interest rate threshold over their life.
The Joined Chambers of the Supreme Court ruled that the conclusion of the contract is the only moment to verify if a loan exceeds the interest rate threshold, not having any relevance the moment when the interest is payed. Therefore, the sanction provided for by the Italian Civil Code, art. 1815 c.c., cannot be extended to the case of “supervening usury”, in which the interest rate, lawful ab origine, exceeds the interest rate threshold in executivis.
The conclusion of the Joined Chambers is the result of an interpretative inquiry: there is not, in the Italian Law, any peremptory norm forbidding the repayment by the borrower of an interest over the interest rate threshold, during the contractual relationship, and so, the “supervening usury”. Therefore, it could not be imagined – according to Art. 1815 of the Civil Code – the illegitimacy of the payment.
As outlined above, for the Court, there is not such a peremptory norm. As it is observed, the reading of Article 644, Penal Code (the only norm containing [rectius: that contained in the past] an explicit prohibition for the payment over the interest rate threshold) has to be done in accordance to the authentic interpretation given by Art. 1, Decree Law n. 394/2000.
The mentioned article, limited the operations of Art. 644, Penal Code at the time when the interest rate is agreed, establishing that “for the application of art. 644, Penal Code, and art. 1815, second subparagraph, Civil Code, has to be considered over the interest rate threshold the interest exceeding it at the time when it is promised, or anyway agreed, without considering the moment when it is payed”.
There are not further prohibitions in the Italian Law:
- nor in Art. 2, subparagraph 4, L. 108, that defines the interest rate threshold; it is just as an addition of the interdiction already established by Art. 644 c.p. (having them the same scope), and it has not any autonomous perceptive function;
- nor in Art. 1815 c.c., that is also subject to the authentic interpretation given by art. 1, Decree Law n. 394/2000; it presumes a notion of usury defined elsewhere, namely in art. 644 c.p., integrated by the mechanism provided for by L. 108.
It follows from the above that a clause containing a rate of interest exceeding the interest rate threshold during the life of the contract cannot be criticized for being invalid.
The Court of Cassation, then, investigated on the principle of good faith and fair dealing, and on the possibility that – pursuant to the mentioned principle – it could be sanctioned the “supervening usury”. According to a not very widespread legal construction, the payment of interest (over the interest rate threshold) is against the duty of solidarity provided by Art. 2 of Italian Constitutional Law and, in particular, against the principle of good faith, its corollary. In other words, that duty would impose to the creditor not to demand the payment of interest exceeding the interest rate threshold and, at the same time, it would “justify” the debtor’s default on his obligation. For the Court, it is excluded that the principle of good faith could be relevant in the present case. The Supreme College observes that “the infringement of the principle of good faith cannot be seen in the exercise of an obligation agreed in a contract, but only in the way obligation is performed”. Therefore, neither the principle of good faith is capable, ex se, of sanctioning the “supervening usury”, being it necessary, instead, an inquiry by the Judge on the concrete circumstances in which the obligation is performed.
It appears that the only remedy available to the borrower can be the contractual one. It could be suitable the so-called “safeguard clause”, often contained in loan mortgage contracts, that could make the interest rate of a contract within the interest rate threshold imposed by current regulations.
In conclusion – and from another (and provocative) perspective – the irrelevance of “supervening usury”, might influence (and perhaps bring to an end) the debate in the case-law, on the possibility that the default interest can be considered for the purpose of application of Art. 1815 c.c. In fact, the mentioned judgement appears to be consistent only to the interpretation that excludes that the default interest could be submitted to the interest rate threshold. The usury of default interest is impossible at the time when the contract is concluded, because of its nature: the payment of default interest is, in fact, inextricably linked to the behavior of the borrower, which is, for sure, not predictable at the time when the contract is concluded. With the result that it cannot be imaginable (nor viable) that the default interest could, at the time of the agreement, exceed the interest rate threshold.
Also, the application of default interest is, in other words, the result of an occurrence – in this case, not caused by norm, nor caused by the development of the market – but caused by the behaviour of the debtor, and for this reason, not capable to determine usury ab origine, the only relevant usury for the Joined Chambers. If so it is, the principle stated by the Court of Cassation could determine also the impossibility to submit to the interest rate threshold the default interest, because of its very nature, purely eventual, as well as determine definitively the sunrise of “supervening usury”.