Malta [Case 11 : usurious contracts]

Abstract

Ms Moneypenny may definitely challenge Bond Bank's claim and the court would reduce the sum that she still owes to Bond Bank to a total of €1,250. Firstly, the legal nature of the credit agreement would be equated to a commercial loan for consumption (mutuum), and not an overdraft. This is due to the fact that the amount Ms Moneypenny has to pay is fixed and due when the agreement is reached, and also because the amount due reduces in a fixed pre-agreed manner proportionate to the payments that she makes. At the same time, since a total sum of €12,000 over 30 months must be repaid when only €5,000 was borrowed, this loan agreement would be considered as prima facie concealing usury as: ( 1) even if one were to exclude from consideration the agreed final payment of €5,000, the annual interest to be paid on this loan amounts to 58% simple interest, far exceeding the maximum allowable rate of 8% laid out in the Civil Code, and (2) the overall total sum to be repaid according to the agreement is well over double the amount of capital originally loaned; contravening the ultra duplum rule.