The CJEU ruling establishes several criteria for the judges to determine in each case whether the application of the index was abusive or not, to decide whether the mortgage can be interest-free or the Euribor should be applied and to determine how much money those affected are able to recover.
Hundreds of thousands of families are closer to the possibility of recovering the money that banks and savings banks overcharged and arbitrarily applied to their mortgages the IRPH (Mortgage Reference Index) the CJEU (Court of Justice of the EU) has ruled that this is a potentially abusive clause.
What is IRPH?
It is one of the six official indexes published by the Bank of Spain as a reference to calculate loan interest. It calculates it from the average of the APR (Annual Equivalent Rate) of home loans of more than three years duration signed by the financial entities in the previous month, although its application is not mandatory but optional. This is one of several rates which were stopped in 2013.
What has the CJEU ruled?
The EU court has empowered the Spanish courts to study the possible abusiveness of the IRPH, something that requires two requirements: that the mortgage papers do not include “precise and understandable criteria” (beyond standard grammar) for an “average consumer” regarding its effects or that it lacks a graph on its evolution in the last two years. In that case, the judge can declare its application abusive, which leads to its nullity and its disappearance from the contract.
The judgments must establish whether, in case the IRPF application is declared abusive, the interest will be calculated with another index such as the Euribor or if the mortgage is interest-free, with the consequent return of the overpaid money from the first instalment, in both cases.
This substitution can only be imposed when the nullity of the clause entails that of the entire contract and that exposes the mortgaged “to especially damaging consequences” such as the obligation to immediately return all the outstanding principal.
Where can it be claimed?
The normal thing is to first submit a claim to the bank, either by writing in the branch or through the channels that, as happened with the floor clauses, banks can enable through their websites.
In case of obtaining a negative response, or not obtaining a response, the next step is to file a lawsuit that will be processed by the Courts of “First Instance” specialised in banking matters, the same one that heard the cases of floor clauses and mortgage expenses.
The claim ends there?
No. The bank can choose to accept the client’s claim for compensation and withdraw the case at any time, even before reaching the court to save the eventual costs of a conviction, although it is foreseeable that a new lawsuit will begin with both resources before the provincial hearings and, if later there are discrepancies between them, before the Supreme Court. At best, the first pre-hearings of these lawsuits would begin next year.
Who has to prove if there was deception?
In matters of this type, it is the bank that must demonstrate that the consumer had been correctly informed about the consequences of contracting a loan encumbered with the IRPH.
Can you claim on any mortgage to which the IRPH was applied?
Yes. The CJEU ruling makes it clear that “there is no need to temporarily limit the effects” of its decision, which means that any natural or legal person whose mortgage is linked to IRPH, even in the case of having been cancelled, can request the return overpaid.
However, and although the community court imposes a completely different criterion from that issued by the Supreme Court and in force until now, there is a limitation: those mortgages whose case has already been resolved by a final judgment cannot file a new lawsuit, since that is consider “res judicata”. Those sentences are not reviewable.
However, many judicial parties and hearings in Spain had chosen to suspend the processing of IRPH-related litigation pending the European court’s ruling.
Does the lawsuit ensure collection?
No. The lawsuit, or the previous claim to the bank, opens a lawsuit in which something is raised about which, successively, a judge of First Instance, a court of a Provincial Court and, where appropriate, another of the First Chamber of the Supreme Court, without ruling out some creative approach. Once the matter is over, it may end up going back to the CJEU to resolve something else that is currently not known.
Can the bank offer the possibility of renegotiating the mortgage?
Yes, although it does not seem that financial institutions are going to opt for that alternative when the renegotiation of loans with floor clauses is in question in the same CJEU after several provincial hearings, although not the Supreme Court, concluded that it is not possible to rewrite a condition of a contract that is null and void as abusive.
What is the difference between applying the IRPH and the Euribor?
The two indices are separated by a fork of almost two points, which means paying 25,000€ euros more in interest for every 100,000 of principal on loans over twenty years and almost 40,000€ on those with thirty year terms.
How did the matter get to the CJEU?
The matter came to the European court through a preliminary question, which is a procedure in which a judge raises the doubts he has about the Community regulations that affect a matter that is on the table. In this case, it was the Court of First Instance number 38 in Barcelona, in which the demand of Marc GMG, a citizen who in July 2001 had contracted with Bankia a mortgage of 132,226 euros encumbered with the IRPH, which, according to the magistrate, was going to suppose him to pay between 18,000 and 21,000 euros more than he would have had to pay if the Euribor had been applied to him.
What banks does it affect?
Almost everyone, with few exceptions such as Bankínter, which due to its business model barely sold mortgages in the bubble years. Nor did the rest practically do it, although now, after having absorbed savings banks during the costly process of rescue and restructuring of the sector, they admit an exposure of around 17,500 million euros: Santander foresees an impact of 4,300, BBVA another of 3,100, CaixaBank one of 6,446, Bankia calculates it at 1,600 (these last two entities have reduced the impact), Sabadell fears that it will cost 831, Kutxa evaluates the loss at 727, Liberbank at 209, Unicaja at 200, and Ibercaja at 50.
This information has been taken from articles published on the internet, compiled by Juan Antonio Rodríguez and translated by David Fisher