What consequences does the new ruling of the European Justice have for those affected by the IRPH?

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He Court of Justice of the European Union (CJEU) has given a new twist to the legal conflict between thousands of people who in their day contracted a mortgage referenced to the IRPH with the big banks when ruling that the credit formalization process must guarantee that the information they receive is sufficient and accessible.

Specifically, the Tribunal points out that a circular from the Bank of Spain of 1994, from which it can be deduced that a negative differential had to be applied to the IRPH, something that was not communicated to the consumer in the court case and whose knowledge “cannot be reasonably required of an average consumer”. This circular warned of the IRPH mechanism and the need to apply a negative differential to equalize this index with the Euribor, “something that the Bank of Spain deemed appropriate to draw attention to”, according to the CJEU in its ruling.

The resolution is a specific response to the questions raised by a court in Palma de Mallorca about a mortgage in the hands of Banco Santander referenced to the IRPH index which, according to the court, was unfavorable for the consumer because it is set based on the average rate of the Loans in progress but includes rates and commissions in calculation, so it is usually more expensive than other indices such as the Euribor.

The court asks if the positive differential that is applied when calculating the IRPH is contrary to community legislation given that, according to its interpretation, the Bank of Spain urged in a circular of 1994 to apply a negative differential and, if so, if this constitutes an unfair practice that must be taken into account to assess whether the clause that referred the mortgage to the IRPH is abusive.

Banco Santander defends that the clause in question was negotiated individually with the client and that the IRPH is an official and public index and, therefore, accessible to consumers. However, the CJEU specifies that the information should have been transferred to the consumer in an adequate manner and the judges will have to examine whether the mere reference in the deeds to it “are sufficient”.

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