This Tuesday the Court of Justice of the European Union (CJEU) issued its long-awaited judgment in relation to the preliminary ruling requested by the Court of First Instance No. 38 of Barcelona, regarding the possible unfairness of a mortgage loan signed by a consumer that established a variable interest rate clause referenced to the savings banks mortgage loan benchmark index (IRPH Cajas).
In general terms, the judgment confirms the Opinion of the Advocate General published on 10 September 2019. Thus, the Court of Justice does not question the legality of the use of the IRPH Cajas (Índice de Referencia de Préstamos Hipotecarios) as a reference in mortgage loan contracts, since it is an official index provided for by Spanish legislation.
However, given that it considers that the clause does not reflect mandatory legal or regulatory provisions (which are those that can be exempted from review for unfairness), it considers that it can be subject to such review.
In order to determine the possible unfairness of the clause, it will be necessary to verify the transparency of the clause, in particular in relation to key aspects such as the method by which the index is calculated and its past evolution.
The aim, according to the European Court, is that 'an average consumer, who is reasonably well-informed and reasonably observant and circumspect', should be able to understand how this index works and to evaluate the implications of using it. In order to determine the possible unfairness of the clause, it will be necessary to verify its transparency.
In this regard, it is important to note that the judgment itself indicates that the national regulations in force at the time the disputed mortgage loan was taken out complied with these transparency criteria, given that (i) the calculation method was easily accessible to the borrower (having been included in Bank of Spain Circular 8/1990, published in the Official State Gazette), and (ii) the regulations required providing information on the evolution of the index over the previous two calendar years. The Advocate General's opinion was also favourable to the financial institution, taking the view that the transparency requirements were adequately met in the case in question.
Another particularly relevant aspect included in the question referred for a preliminary ruling concerns the consequences of potentially deeming this clause to be unfair. To this end, the Court of First Instance proposes different alternatives, ranging from the annulment of the mortgage loan contract to the application of an alternative index such as the Euribor, including the elimination of the obligation to pay interest.
In this regard, and given the potentially very detrimental impact that the annulment of the contract would have on the borrower, given that the latter would be obliged to immediately repay the outstanding principal, the CJEU considers it compatible with EU law for the national courts to replace the IRPH Cajas clause with another that includes the substitute index contemplated in Law 14/2013 of 27 September, i.e. financial institutions mortgage loan benchmark index (IRPH Entidades).
Therefore, the judgment establishes that it will be up to the national courts (both in this dispute and in other disputes that may arise concerning clauses with similar characteristics) to control the transparency in each case. In this regard, it should be borne in mind that there is already a judgment of 14 December 2017 in which the Supreme Court, in relation to the IRPH, concluded that it passed the transparency test. There already exists a 2017 judgment in which the Supreme Court concluded that the IRPH passed the transparency test.
It is worth recalling that the IRPH is one of the official indexes contemplated in our legislation, which is published by the Bank of Spain. The Spanish mortgage market is one of the most competitive in the EU, having provided access to housing to large sections of the population, and it is reasonable for different interest rate setting alternatives to coexist within it, seeking to respond to different needs.
In its conception, the IRPH sought to provide greater stability to mortgage repayments by linking them to a benchmark specific to the mortgage market, something beneficial for the borrower as these are very long-term loans (often longer than 30 years). Therefore, the fact that it is above interbank benchmarks such as the Euribor should not call into question its validity, provided that all the information required by prevailing regulations has been disclosed during the commercialisation process.