Supervening usury: between authentic interpretation and case law debate

The Italian Court of Cassation has once again addressed, in joint session, the issue of supervening usury (the so-called “usura sopravvenuta“).

By recent decision n. 24675 of 19 October 2017, the Supreme Court noted that:

When the interest rate agreed by the lender and the borrower exceeds, during the performance of the agreement, the usury threshold determined on the basis of the provisions of Law n. 108 of 1996, the validity or effectiveness of the relevant contractual clause stipulated prior to the entry into force of the aforesaid law or subsequently for an interest rate that, as resulting at the time of stipulation, does not exceed said threshold, remains unaffected; and the lender’s entitlement to claim and receive the interests at the rate validly agreed upon, is not deemed contrary to the obligation of performing the agreement in good faith just because said threshold was exceeded“.

The decision stems from a case-law debate arisen immediately after the issuance, on 28 February 2001, of Law of Authentic Interpretation n. 24.

The issue on the lawfulness of supervening usury was brought to the attention of the Joint Sections at the beginning of 2017 (see interlocutory order n. 2484 of 31 January 2017).

For many years the issue has been the subject of a lively debate between the criminal and civil sections of the Supreme Court which ultimately ended, after the introduction of Law n. 108 of 7 March 1996 laying down provisions against usury (hereinafter, the “1996 Law“), in a fiery clash of conflicting trends in case law.

As known, the 1996 Law has introduced a specific method for calculating and setting the value of the legal rate of interest, the so-called “threshold” – recalled by art. 644 of the Italian Criminal Code and, indirectly, by art. 1815 of the Italian Civil Code – which works as reference interest rate to verify whether an interest rate can be classified as “usurious”.

In ruling on the correct interpretation of the law, the Supreme Court, by admitting that during the term of the agreement the interest rate agreed by the parties, i.e., an item capable of being investigated by the judge, might prove to be usurious with respect to the “threshold” rate set from time to time, had initially recognised the possibility to discern a supervening usury instance (see, in this respect, Supreme Court decisions n. 1126 of 2 February 2000; n. 5286 of 22 October 2000; n. 14899 of 17 November 2000).

The recognition of the supervening usury institution, left however open some issues, like, for instance, its possible retroactivity or applicability to agreements executed prior to the entry into force of the 1996 Law.

To remove all doubts, by art. 1, first paragraph, of Governmental Decree n. 394 of 29 December 2000, converted by Law n. 24 of 28 February 2001, i.e., a rule of authentic interpretation, the Lawmaker clarified that the only relevant item for the purpose of evaluating the interest rate was the moment in which such rate was stipulated.

Despite the intervention, the lawmaker failed to settle the matter once and for all: judges  have in fact continued to propose diverse interpretative solutions by either supporting the possibility to establish the supervening usury or asserting that it should be denied (especially by virtue of the new rule of authentic interpretation).

Moreover, the same supporters of the supervening usury contributed to make the issue even more uncertain because, by interpreting it in different ways, envisaged consequences of many types.

In decisions where the trend developed before the entry into force of Law n. 24/2001 was recalled, the consequences envisaged on the agreement concerned only the period subsequent to the entry into force of the rule of authentic interpretation (see Supreme Court decisions n. 8442 of 13 June 2002 and n. 10032 of 25 May 2004). In other decisions, the mere fact that the “threshold” had been exceeded resulted in the clause be ex nunc ineffective (see Supreme Court decisions n. 4092 of 25 February 2005; n. 4093 of 25 February 2005; n. 6550 of 14 March 2013; n. 2149 of 31 January 2006, and n. 17854 of 22 August 2007); others decisions associated the ineffectiveness ex nunc to the automatic replacement – pursuant to articles 1339 and 1419, second paragraph, of the Italian Civil Code – of the rate initially agreed with the (new) “threshold” rate (Supreme Court decisions n. 602 and n. 603 of 11 January 2013, ); other decisions, by acknowledging prior developments, held that the ineffectiveness could be declared ex officio (Supreme Court decision n. 17150 of 7 August 2016).

To put an end to this long-lasting and widespread debate, the Supreme Court found it necessary to meet in joint session.

By the decision at issue, the Supreme Court Judges have removed all doubts confirming the trend according to which the instance of supervening usury is inexistent.

In compliance with the principle set forth in Article 101, second paragraph, of the Italian Constitution, the Court held that the Judge, in applying either Article 644 of the Italian Criminal Code or Article 1815, second paragraph, of the Italian Civil Code, would under no circumstances be allowed to abstain from abiding by the rule of authentic interpretation provided for by Article 1, first paragraph, of Governmental Decree n. 394 of 2000 (i.e., a rule that, by decision n. 29 of 25 February 2002, the Italian Constitutional Court had declared constitutionally legitimate).

Such an interpretation, on the other hand, appears to be perfectly in line with the rationale behind the 1996 Law, which is – as demonstrated also by the explanatory report – “fighting usury efficaciously” by emphasizing the moment in which interests are agreed and enhancing, by so doing, the will and responsibility of the agent.

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