CJEU rules that IRPH mortgages are abusive
The Court of Justice of the European Union (CJEU) has ruled on Tuesday on the validity of mortgages linked to the IRPH or Mortgage Loan Reference Index, which it has declared abusive. A verdict that could cost Spanish banks up to 44,000 million euros.
Specifically, the Chamber considers that the clause in a mortgage loan contract by virtue of which the interest rate varies according to the reference index (in this case, the IRPH), falls within the scope of application of the Unfair Terms Directive, since that clause "does not reflect mandatory legal or regulatory provisions".
The European Court therefore determines that Spanish courts must check that such clauses are "of a clear and comprehensible nature". In the event that the national courts find them to be unfair, they may be replaced "by a legal index applicable in a supplementary manner, in order to protect consumers".
The Luxembourg Court has adopted this decision in response to a triple preliminary ruling by a Barcelona judge on the validity of this index, which has kept consumers and banks on tenterhooks for months. In September, Advocate General Maciej Szpunar ruled on the matter, opening the door to the annulment of these mortgages when they are abusive.
What is IRPH and why is it so controversial?
The Mortgage Loan Reference Index (Índice de Referencia de Préstamos Hipotecarios) is an official index prepared monthly by the Bank of Spain. It is known for being the average rate applied to mortgage loans over three years for the purchase of free housing granted by credit institutions in Spain. It is the second most widely used reference rate, after the Euribor.
The controversy over its use as the main index was triggered between 2013 and 2016, when it stabilised at values close to 2%. In practice, this left customers with IRPH in a situation of inequality with respect to those mortgaged with Euribor, whose payments were reduced considerably due to the progressive fall of its reference index.
Consumers then began to ask the Bank of Spain to nullify the IRPH as "abusive" and ended up taking their case to court. However, the Supreme Court upheld the IRPH in November 2017, considering that the mere reference of a mortgage to an official index does not imply a lack of transparency or abuse.
However, a Barcelona court took the matter to Luxembourg, which now had to clarify whether the IRPH was null and void or illegal, whether it should be subject to the same transparency controls as other products and whether, in the event of a ruling against the banks, retroactivity could be granted.
Last September, Advocate General Szpunar already pointed in this direction, stating that, in accordance with EU legislation, judges can control whether the IRPH is abusive. Furthermore, he ruled out that the mere fact that it is an official index gives guarantees of transparency and warned that the calculation of the IRPH is "complex and not very transparent for the average consumer", which is why institutions should provide "sufficient" information on the method used and mention the evolution of the IRPH in the past.
