The Court of Justice of the European Union (CJUE) has sent the case about the validity of mortgage clauses back to Spanish courts. The dispute centers on the mortgage loan index IRPH and concerns a figure of at least 3,000 million euros. The emphasis shifts toward Santander Bank, the institution at the heart of the decision, and the role of the Spanish judiciary. European judges require the bank to show that the disputed terms were negotiated individually. If that proof is lacking, the national judge must assess for transparency and potential imbalance against the consumer, guided by the court’s broader standards and the goodwill expected in similar cases.
The ruling answers a preliminary question raised by the Palma de Mallorca court of first instance after a decision in October 2020 by the Supreme Court. Although the CJUE had previously indicated in March of that year that consumers could challenge abusive mortgages and that national courts could annul such agreements, the IRPH was the focus of this case. The litigation involves two consumers and Santander Bank versus Banco Santander, previously Banesto, concerning the validity of a periodic adjustment provision from May 2006 for a loan of 197,934.54 euros with a variable rate. The contract cycle renews every 12 months and applies a new rate for the next 12 months until the contract ends. This framework established the annual adjustment using the IRPH reference rate, with potential adjustments to align with market rates.
Under the new scheme, the rate is set using the IRPH reference, which includes a broader market view and may be adjusted by a negative spread to match a market benchmark. Consumers challenged the clause in February 2020, arguing its abusive nature and seeking the invalidity of the article and compensation from Banco Santander. The claimants argued that the bank used a modest rise in the index as a bait to entice customers to accept a loan with an IRPH based rate rather than Euribor, thereby offering a lower apparent rate. They calculated damages from the clause at 39,799.25 euros.
substance transparency
The CJUE highlights that the national judge must assess the clause on its own terms, taking into account the specific circumstances of each contract. Spanish judges will need to consider this framework during their analysis. The court notes that when evaluating the transparency and abusive potential of a clause, it is appropriate to examine the information originally provided with the contract. This includes the calculation method described in a 1994 circular and the need to reference the IRPH index, along with the inclusion of a negative spread to equate the rate to the market equivalent. The court also insists on checking whether this information was sufficiently accessible to an average consumer.
Specifically, the complainants argued that the provision should be struck down because of the use of an unfavorable differential tied to IRPH as a reference rate. They contended that a 1994 circular did not justify such a negative spread as an essential feature of the product. The question is whether the information provided meets the standard of reasonable consumer understanding in the context of a mortgage contract.
calculation methods
The European court accepts that IRPH originated from an officially published circular in 1990 and notes that the disputed clause mentions the related annex and the Bank of Spain origin. It is now the responsibility of the Spanish courts to verify that the information given is sufficient for a normally informed consumer to understand the consequences of entering into the mortgage loan. The court frames this as an assessment of how crucial the introductory information from the 1994 circular is for a consumer to evaluate the financial effect of the agreement. The CJUE points out that the information, or lack thereof, appears useful for creditors to guide customers toward a comparable market rate.
Spanish courts must determine whether obtaining this information imposes a requirement beyond what a typical consumer can reasonably be expected to perform, especially when the area involves legal analysis. Regarding potential abuses, Banco Santander must first prove that the clause was negotiated with the consumer on an individual basis. If that is not shown, the national judge will evaluate the contract elements to determine possible violations of integrity and any significant imbalance to the consumer. The judge should use the guidance from the Court of Justice to decide how to weigh these factors and whether the clause harms consumer interests beyond reasonable expectations. The decision mirrors a broader call for fair dealing in consumer finance across member states and emphasizes the role of national courts in applying EU principles to domestic contracts. [Citation of CJUE case law and relevant circulars, with attribution]