January 27, 2020

Ordinary and Default Interest – Usury

By Adrián Salgado

On December 13, 2019, the Plenary Third Circuit in Civil Matters issued an opinion contradictory to opinion PC.III.C.J/50 C (10a.), entitled: “Ordinary and default interest in commercial matters. Such must be analyzed independently in order to determine whether they are usurious, even when they are incurred simultaneously and, therefore, coexist.” In said opinion, the court ruled that, in commercial matters, when ordinary and default interest obligations exist at the same time, the analysis to determine the issue of whether interest is usurious must be assessed separately, that is, without adding both types of interest to each other. The court made such determination because it considered the characteristics of these types of interest to be different and because default interest, being a sanction, is usually higher than ordinary interest, which typically corresponds to the profit earned by a creditor for issuing credit.