The Supreme Court announced on Wednesday one of the most awaited rulings by banks and consumers on the mortgage reference index (IRPH), used to calculate the repayments of around a million mortgages and which for years has proved more expensive than Euribor-based loans. The Plenary Session of the Civil Chamber ruled out declaring an abuse and, therefore, canceling the generality of this type of variable index, on the understanding that it must be examined on a case-by-case basis and verify whether the entities have provided consumers with all possible information that allows them to understand the functioning of this controversial index. In this sense, in two new sentences, the judges of the Supreme Court have updated the guiding parameters used by first instance judges to carry out the transparency examination that determines the legitimacy of the clauses.
The Supreme Court resumed this legal debate on 1 October when the 10 judges that make up the Civil Chamber met to begin analyzing the pending appeals on the matter, taking into account the latest ruling of the Court of Justice of the European Union (CJEU), of 12 December 2024, in which it reiterated that there are situations in which Spanish judges can annul this clause for lack of transparency, as well as the previous one issued on 13 July 2023.
Based on these higher court rulings, numerous lower courts have begun resolving consumer cases seeking banks to return overpaid amounts. However, the Supreme Court, Spain’s highest judicial body, had not spoken for more than three years. In 2020 it approved banks to offer IRPH mortgages, as an alternative to Euribor, despite not being transparent in their marketing. And in 2022, a new ruling was reaffirmed and issued in which he applied the European doctrine of the time, which confirmed his thesis and underlined that information relating to the IRPH is published in the BOE.. In this way, the magistrates understood that this official publication exempted the entities from having to provide the client with an information brochure on the functioning of the index, as well as comparative information on the different official indices and their evolution.
In the two sentences, dated November 11, the Supreme Court judges uphold their doctrine and agree with the judges believing that the information provided was correct and sufficient. However, they underline that “it is not possible to provide a single solution regarding the abuse of the variable interest clause with reference to the IRPH, since it will depend on the individualized examination on a case-by-case basis, in accordance with the tests carried out”.
Negative differential
One of the most controversial points, and which has not yet been ruled on by the High Court but by the CJEU, is whether the mortgage contracts to which the IRPH refers applied a negative differential to make them more competitive, as indicated in a 1994 Bank of Spain circular, which is no longer in force. The big difference with the Euribor is that its calculation is based on the average annual equivalent rate (APR) of existing mortgages, therefore, if this differential is not applied, the new loans will be higher than the market ones including the expenses and commissions linked to the APR. In fact, the avalanche of lawsuits in court for this type of mortgage arose when the Euribor began to fall into negative territory (from February 2016 to April 2022), which made mortgages calculated with that reference cheaper; while those that contained the IRPH were maintained, widening the price difference between them, which fluctuated between 200 and 400 euros per month.
For the Supreme Court this information, published in Official State Gazette (BOE), is useful to the consumer to help him calculate the compensation and, as indicated by European justice, is an element that first instance judges must take into account when carrying out the transparency test. It should be noted, however, that if the IRPH loan contracts refer to the circular of the banking supervisory authority, it is “irrelevant” that no express mention of the negative differential is made. And, if there is a first fixed rate period, he adds that it would also be irrelevant if the APR applicable to that first period was indicated or any other reference to the concept of APR was included.
As the rulings explain, the CJEU links the control of transparency to whether the information is sufficiently accessible to the consumer. “Such accessibility can be achieved thanks to the indications provided in this regard by the trader, but such indications are not the only possible source, nor even a priority, whereby the publication of the index in the BOE would satisfy the transparency check provided that the institution indicates this fact to the consumer so that it is presented as accessible.”
The Supreme Court thus strengthens its jurisprudence and underlines that the use of the IRPH does not reduce the possibility for the consumer to compare this loan proposal with others that use other indices, that is, “provided that the current value and historical values of the said indices are communicated or accessible”.
With all this, in the guide to follow to carry out the transparency check, which the Civil Section of the Supreme Court has begun to define in its previous rulings on the matter, it is remembered that the clauses of the contracts must be understood by a reasonably “discerning” average consumer and that they must explain the specific functioning of the method of calculating this interest rate (IRPH plus differential) with “precise and understandable criteria, the potentially significant economic consequences of the remunerative interest clause on their financial obligations”.
