Compound Interest and its Validity (or Invalidity) in the Bank-Customer Relationship: the State-of-the-Art of British Common Law Discussed by virtue of a Comparative Analysis

Pierre Sinclair

    Research output: Contribution to journalArticlepeer-review

    494 Downloads (Pure)

    Abstract

    Compound interest is a concept that, historically, has been tainted with an essentially mercantile flavour. It relates to the custom of banks in capitalising on the interest due by a client upon the expiry of a certain interval (the rest). Such practice, zealously vilified in some quarters whilst acclaimed as a prosperous enterprise in others, has been challenged more recently, at both judicial level and under statute, in the case of Italy. This contribution, in briefly recalling the origin of the concept of anatocism (the orthodox definition of compound interest) and, therefore, its Roman predecessor, the usurarum usurae and the futurarum usurarum usurarae (usurae), seeks to examine the state-of-the-art apparatus applicable to compound interest in the British common law. Such deliberations will thereupon give rise to what this paper aspires to describe as a peculiar development. In this respect, attention is drawn to the recent Consumer Rights Act 2015 and the manner in which the bank customer is theoretically entitled to rely upon it, with specific reference to the compound interest clause. As regards the ‘Continental experience’, the Italian jurisdiction, awash with judicial twists and incandescent doctrinal views on this topic, is discussed and analysed as a compelling and stimulating comparator.

    Original languageEnglish
    Pages (from-to)174-200
    Number of pages27
    JournalLaw and Economics Yearly Review
    Volume5
    Issue number1
    Early online date11 Aug 2016
    Publication statusPublished - 2016

    Fingerprint

    Dive into the research topics of 'Compound Interest and its Validity (or Invalidity) in the Bank-Customer Relationship: the State-of-the-Art of British Common Law Discussed by virtue of a Comparative Analysis'. Together they form a unique fingerprint.

    Cite this