Case law analysis of Mortgage Loan Reference Index clauses in Spain (Judgment No. 669/2017, of 14 December)

Written on 21 Mar 2018

In Spain, particularly since 2008, coinciding with the beginning of the economic crisis, many financial entities felt attracted by the idea of referencing the mortgage loans to alternative indices that did not present as much volatility as the Euribor. Among these indices was, precisely, the Mortgage Loan Reference Index.

The Mortgage Loan Reference Index (Índice de Referencia de los Préstamos Hipotecarios  – hereinafter, “IRPH“) clause is one of the last fronts between the financial entities and the consumers. Analysing the situation, it can be noted that there are many judgments in which the IRPH clause was declared void because of transparency defects. However, it is the enlightening Supreme Court judgement number 699/2017, of 14 December (hereinafter, “STS 669/2017“), which has undoubtedly marked a milestone in this matter.

To such extent, the STS 669/2017 points out that the IRPH as such cannot be subject to a transparency review, as both the Council Directive 93/13/CE and Law 7/1998, of 13 April, on General Contract Conditions exclude from their scope the general conditions derived from legal and administrative provisions. That is to say, the Supreme Court makes it clear that the mere referencing of a mortgage loan to the IRPH does not imply a lack of transparency. That said, what can be judicially monitored is the use of such IRPH clause in a particular contract under the general conditions, based on the duty of information that concerns all predisposing professionals.

According to STS 669/2017, the financial entity cannot be required to explain in detail how an index supervised by the Bank of Spain works. Neither, from a transparency point of view, can the financial entities be required to offer the Euribor to the consumer, despite the fact that, after entering into the contract, it has been proven –in this particular case- that the referencing to Euribor would have been more beneficial for the consumers’ interest. This is a significant matter and, in fact, the STS 669/2017 refers expressly to the “retrospective bias”, in relation to the comparative evolution between the IRPH and the Euribor, to conclude that “it cannot be used as a guide for transparency control”.

Nevertheless, and in accordance with the particular vote set out, the projection of the transparency control made by the judgment is not consistent with the law. Moreover, the particular vote asserts that in this present case “no specific or additional information was provided” to the consumer and it concludes that the duty of information that affects all financial entities should be taken further.

In any case, the STS 669/2017 dismisses the invalidity action regarding the IRPH clause as it has been proven that the clause was clear and grammatically comprehensive, having offered the financial entity enough pre-contractual information to the consumer. For this reason, the Supreme Court understands that the consumer should have known and comprehended that the variable interest of the mortgage loan was calculated pursuant to an index previously determined.