The conclusions of the General Attorney of the European Court of Justice were announced on the morning of Tuesday, September 10th 2019, and represent a blow to both the Spanish banks and to the Supreme Court’s ruling of December 14th, 2017, that stated that mere reference to the index did not imply a lack of transparency.
Their conclusions, although not binding, mark the path to be followed by the EUCJ in its sentence that is expected by the end of this year 2019. And could mean that Spanish banks will end up paying out billions of Euros in compensation to up to 400,000 affected mortgage customers in Spain.
The General Attorney of the EU Court of Justice (EUCJ), Maciej Szpunar inferred that IRPH is not excluded from the scope of the European Directive on abusive clauses and that, therefore, it can be judicially controlled, as happened with the ground clauses.
“(..) I consider that Directive 93/13 must be interpreted as meaning that a contractual clause agreed between a consumer and a professional, such as the one in dispute in the main proceedings, which sets an interest rate based on reference value one of the six official legal benchmarks that can be applied by credit institutions to mortgage loans with variable interest rates, are not excluded from their scope of application. “
The judges will now investigate whether the banks that sold mortgage loans referenced to this index met the transparency requirements.
If the clause is found and declared abusive, the banks will have to return the money overcharged to their customers.
If the EUCJ fails to rule in accordance with the Spanish General Attorney the blow to the Spanish banking system is estimated at billions of euros.
Average claim per mortgage is around 20.000 euros.
IRPH: Any solution previous to the Decision of the CJEU?
The conclusions of Maciej Szpunar, General Counsel of the Court of Justice of the European Union, on the abusive application of the IRPH clause, will be announced after September 10th 2019.
Once the wording of the Judgment is known, the appropriate judicial actions may be initiated.
In the meantime, those who have a mortgage linked to this reference can replace it with the Euribor to pay less each month without the need to file a lawsuit.
There are three options to switching to a Euribor mortgage:
1. An agreement with the original bank modifying the initial mortgage deed:
The content of the mortgage agreement will reflect a change in the reference index of the interest rate from IRPH to EURIBOR. This option can result in savings of up to 1,200 euros per year.
However, the bank can refuse and if it accepts, it will ask for something in return: increase the linkage, increase the differential, as examples.
These types of operations usually have an associated commission of between 0.1% and 1% of the outstanding capital, plus the notary, registry, mortgage management fees, etc.
2. Transfer the mortgage to another bank that agrees to apply a different type of interest (fixed or referenced to Euribor).
Your existing mortgage provider will have 15 days to match or exceed the offer and you are required to accept the counteroffer.
Associated commission is approximately 0.5% of the outstanding capital (or 0.25% if the contract is more than five years old), plus Notary, Registry and Mortgage management agency fees.
3. The signing of a new mortgage, fixed or referenced to the Euribor to cancel the current mortgage loan.
This option is more expensive as the cancellation of the original mortgage loan has its own costs.
In any of these three cases above: if the EUCJ ends up considering the application of this index abusive, you will maintain the right to demand that the bank refund you the extra charge.
In the case of reaching an agreement with your own bank, you must be careful of not signing any agreement regarding the IRPH index.
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