European Court opens door to a million mortgage claims

The Court of Justice of the European Union (CJEU) has given hope to the holders of a million mortgage holders in Spain referenced to the controversial Mortgage Loan Reference Index (IRPH) and whose extra cost for families, at this time, is a serious problem.

Having already gone through the judicial process in Spain without satisfactory conclusion, the matter was taken to the EU, and now the Courts concluded, in a new ruling, that consumers “should receive sufficient information on the calculation methods of said indices” before hiring them.

In essence, the European Court had to rule on whether the IRPH should be declared void for infringing Bank of Spain Circular 5/1994. This document specifies that, in order to match the index with the others existing in the market, it would be necessary to apply a negative differential since this indicator, as a general rule, is more burdensome for the client than other generally applied indices, such as the Euribor.

In this sense, the CJEU has recognised that « this information seems to be useful for these -consumers-, if we consider the fact that the Bank of Spain considered it appropriate to draw the attention of credit institutions to the type of IRPH in relation to the market interest rate and on the need to apply a negative differential to equalize them with said interest rate.

However, it has indicated that it is up to the judicial bodies “to verify that the information thus provided was sufficient to allow an average consumer, normally informed and reasonably attentive and insightful, to actually have knowledge of the benchmark index calculation methods”.

The different consumer associations and law firms specialised in this matter have expressed their satisfaction with the sentence and have opined that it opens the door for those affected to recover their money.

For Jaime Navarro, president of the National Association for the Defence of Spanish Consumption of Services (ANCES), “the need to apply a negative differential was never reported, therefore there would be a lack of transparency in 95% of cases.”

The lawyer JuanJo Ortega, founding partner of the Ortega y García Abogados law firm, a pioneer in Spain in achieving favourable IRPH rulings, has shown himself along the same lines. “This ruling is of great importance for those mortgaged who have their resources in the Supreme Court” explained Ortega, who has stated that this ruling allows us to assess whether there was a lack of transparency with objective data.

“The Supreme Court can no longer look the other way, it must estimate the resources and force the Bank and the public powers to reach an agreement with the million families for whom said index has complicated their lives” he concludes.

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