Spain’s IRPH Mortgages to be revised by Europe?

Clients with mortgages linked to the IRPH index in Spain aim to refer their case to the European courts. They have been encouraged by the vote of two Supreme Court Magistrates who believe that the clause does not meet the required transparency control.

On November 22, Spain’s Supreme Court ruled in favor of the banks after estimating that the mere reference of a mortgage to this official index (IRPH) does not imply an abuse to the consumer; an argument that, in the opinion of the Magistrates Francisco Javier Orduña and Francisco Javier Arroyo, is “not adjusted to law.”

For these two Magistrates, the entities that use the IRPH against other more common indexes, such as the Euribor, would have to establish their “scope and specific functioning, so that the consumer is able to assess, based on precise and intelligible criteria, the economic consequences he is assuming.”

Especially since it is a complex product for the average customer, both because of the way it is calculated and because of its “peculiar configuration”, which makes it “necessary” to actively facilitate adequate and comprehensible information about its application.

The Supreme Court verdict ensures that it was “easily accessible” to an average user, “normally informed and reasonably attentive and insightful”, to compare the conditions used by different lenders in an element “as essential as the price of the loan”. For this reason, the Supreme Court discards that, to determine the transparency of the clause, it is necessary for the bank to verify that the consumer has noticed the economic and legal importance of the operation.

The Supreme Court also states that comparing the evolution of the IRPH with respect to the Euribor, which has had a “more favorable” behavior for the consumer, “cannot serve as a guideline for transparency control” since it is done from a retrospective bias. And they insist that it cannot be said that the IRPH is more expensive when the loan in question, agreed in 2006 for a period of 35 years, “has not yet reached the third part of its term and it is unknown what will happen in the 24 years that still remain for its extinction.”

The lack of a full consensus on the part of the plenary session of the Civil Chamber of the Supreme Court brings hope to clients who subscribed mortgages of such characteristics.  An Appeal before the Court of Justice of the European Union is being studied.

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