Compounding of Interest: The Supreme Court’s Formal Rigour on Written Agreements
By Judgment No. 27460 of 14 October 2025, the Court of Cassation has reaffirmed the invalidity of bank anatocism(compounding of interest) and the strict requirements for the validity of interest compounding in contracts executed prior to 2000 in the absence of a specific written agreement. The ruling establishes that banks may not rely on the unilateral modification of contractual terms to introduce periodic compounding, as such a modification is inherently detrimental compared to the nullity of previous clauses.
Furthermore, the decision addresses the complex issue of the ten-year statute of limitations (prescrizione decennale) in actions for the restitution of undue payments (ripetizione di indebito), placing the burden of proof on the credit institution to demonstrate the "solutary" (payment) nature of the contested remittances.
Factual Background and Regulatory Context
The case arose from a restitution action brought by a company against a bank. At the heart of the dispute was a current account contract dating back to 1992, which involved the application of compounded interest without an original specific agreement.
While the Court of Pavia initially upheld the company's claims, the Court of Appeal of Milan reversed the judgment, deeming the quarterly compounding lawful based on the CICR Resolution of 9 February 2000, despite the lack of evidence of a new written agreement between the parties. The Supreme Court was thus called upon to determine whether, for "legacy" contracts, a unilateral modification of terms is sufficient or if express consent is required.
The Legal Issue: Alignment with the 2000 CICR Resolution
The dispute centers on Art. 7 of the CICR Resolution, which governs the transition of pre-existing contracts to the new compounding regime (requiring equal frequency for both debit and credit interest).
The debate focused on whether a bank could proceed via unilateral modification (under para. 2) if the new terms were not "worsening" (peggiorative). However, jurisprudence must face an objective fact: since compounding clauses prior to 2000 are null and void (colpite da nullità), any new clause introducing compounding is, by definition, detrimental compared to a state of "zero compounding."
The Ruling: No Automatic Transition to Compounding
Upholding the company's appeal, the First Civil Section ruled that there can be no automatic transition to a compounding regime. The Court held that the detrimental nature of the clause precludes unilateral modification, making express contractual approval indispensable under Art. 7, para. 3 of the Resolution.
The principle of law expressed in Judgment No. 27460/2025 clarifies:
"For contracts entered into prior to the entry into force of the CICR Resolution of 9 February 2000, neither the de facto application of compounding terms nor any unilateral modification by the bank shall be relevant; a contractual modification via written agreement is strictly required."
In essence, without the client’s signature on a new contract or a supplementary deed, the bank cannot lawfully compound interest on accounts opened before 2000.
Burden of Proof and Statute of Limitations
The ruling also addresses the statute of limitations for restitution claims. The Court reiterated that, in the presence of a credit facility (fido), payments made by the account holder are "restorative" (ripristinatoria) of the balance rather than "solutary" (repayment), unless they occur on an overdraft exceeding the credit limit.
The burden of proof lies with the bank asserting the statute of limitations to prove the solutary nature of the remittances. This requires a reconstruction of the actual balance—removing unlawfully charged items such as void compounded interest—to verify whether the credit limit was truly exceeded.
