EU ruling opens the door to claims over “unclear” IRPH-linked mortgages

Property sales staff submit land mortgage contract documents to home buyers for sign.

The Court of Justice of the European Union issued a ruling on 13 July 2023 which could pave the way for claims against banks which used Spain’s mortgage price index (IRPH) as an alternative to the interbank rate Euribor to set variable mortgage rates.

The ruling, regarding the interpretation of Directive 93/13/EEC on unfair terms in consumer contracts, emphasised the importance of transparency and accessibility of information in assessing the potential abuse of clauses in mortgage contracts.

What was the main issue in the IRPH case?

A Spanish court referred the case to the EU Court of Justice after two consumers contested a clause in their variable interest rate mortgage contract that referenced the IRPH (Reference Index of Credit Institutions) as the basis for interest rate revisions. They argued that the clause was misleading and lacked transparency.

The consumers sought the nullification of the clause and compensation for alleged damages resulting from its application.

Ruling: accessibility of information is imperative

The Spanish court presented several questions as part of the case, but only one was addressed by the Court of Justice. It focused on the relevance of another circular, Circular 5/1994, which stresses that consumers should have access to a negative spread to be able to align the interest rate with the market rate.

The court emphasised that consumers can only make informed decisions if they’ve had the opportunity to assess the economic consequences of the mortgage contract they’re going to sign.

What are the implications of the IRPH ruling?

This ruling highlights the importance of transparency and accessibility of information in mortgage contracts. It also underscores the role of national judges in evaluating specific cases and determining the classification of contractual clauses. 

This means it will be up to local judges in Spain to decide on a case-by-case basis if mortgages priced off IRPH clauses were fair or not, based on whether they were understandable and transparent.

How do I get a refund on the excess interest charged on my IRPH-linked mortgage?

If your mortgage loan contains the IRPH clause and is deemed abusive by a Spanish court, you have the right to receive a refund.

At CostaLuz Lawyers, we specialize in assisting our clients in reclaiming refunds from banks that have implemented abusive clauses in mortgage agreements. We were among the first to take legal action against Spanish banks and have successfully helped numerous clients obtain refunds and improved mortgage terms.

If you’d like us to investigate and pursue a refund for the excessive interest charged due to the IRPH clause in your mortgage, contact us today!

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