IRPH Mortgages: The CJUE Judgment protects the average consumer
The European Court Judgment protects the average consumer against IRPH mortgages
We continue to provide information to those affected by mortgage loans that establish the calculation of interest by applying the IRPH index, regarding the judgment of the European Court of Justice of March 3, 2020.< /p>
The aforementioned sentence requires banking entities to draft the clause that stipulates the remuneration of interest on the loan clearly and specifically. The consumer must be able to understand how the loan contract works and how interest is calculated. Logically, not all consumers have the same analytical capacity to understand a contractual text that is often written using technical terms typical of the banking business. That is why the judgment of the European Court of Justice refers expressly to the concept of “average consumer”.
The average consumer is defined by the Judgment as one “normally informed and reasonably attentive and insightful”, who is in a position to understand the calculation of interest when the text of the contract uses a accessible language. The definition of the average consumer has been included in different European judgments, such as the judgments of April 30, 2014, Kásler and Káslerné Rábai, C‑26/13, EU:C:2014:282, paragraph 75, and of 20 September 2017, Andriciuc and others, C‑186/16, EU:C:2017:703, paragraph 51. This concept tries to prevent only those consumers with financial training from being able to understand the obligational content of a mortgage loan. The use of confusing or difficult to understand language in contracts is known in legal doctrine as “obscure clauses”.
Our law prevents banks from making use of obscure clauses in standard contracts or adhesion contracts, which are those prefabricated by the bank and that are imposed on the consumer without the possibility of negotiation. This is precisely the fundamental characteristic of these contracts, the absence of individualized negotiation between the agent and the final recipient. It is the agent who draws up the contract, which is not aimed at closing a single operation but rather enjoy a generality aimed at offering agreements to a globality of clients.
As determined by Rogel Vide in his work “Derecho de Obligaciones y Contratos” (p. 95. Ed. Cálamo. Barcelona 2003), adhesion contracts have established themselves as a necessary figure in our contractual field. The category, consolidated at the beginning of the 20th century, arises from industrialization which, as is well known, causes very accentuated disparities in power, great imbalances in contractual force and bargaining power, in such a way that the contract becomes, on many occasions, the means through which the strongest party imposes its conditions and makes its selfish interests prevail. Later on, the adhesion contract, an instrument of oppression at first, became the normal bond that links the modern company with its clientele, achieving a reduction in spending through the standardization of contractual clauses, equal for all and fixed by the stipulater. The aforementioned professor expressly proclaims:
“The defects inherent in adhesion contracts, the rule rather than the exception, are numerous today: illegibility, ambiguities regarding the conclusion of the business and its content, premeditated gaps, inaccuracies, clauses, in short, unacceptable. Even accepting the need for the figure, it is necessary to react against the aforementioned vices, adopting measures aimed at protecting the weakest part, that is, the adherent.”
This contracting specialty has been regulated to prevent standard contracts or adhesion contracts from being used by the predisposing entity as concealing unfair terms and being misleading for the adherent. For more information on the regulations regarding adhesion contracts and their implication in loans with IRPH, you can consult our article IRPH Mortgages: Application of the general contracting conditions law.
The General Contracting Conditions Law (specifically article 6), and the Civil Code (article 1,288) establish a contract mechanism so that the obscure clauses of a contract cannot favor the bank, but must always attend to the interpretation of the clause that most benefits the consumer who adhered to the contract.
The Sentence of the Provincial Court of Asturias (Section 5), of July 23, 2010 declared the following:
“Naturally, the defendant bank is not required to have a duty of fidelity to the plaintiff, as a customer, putting his interest before his or making it his own. In the case of a synallagmatic contract, governed by the exchange of payment benefits, each party will ensure their own but that does not mean that a duty of loyalty towards their client can and should be demanded of the bank in accordance with contractual good faith ( Art. 7 Civil Code) when it is said contracting party who, as here, takes the initiative of contracting, proposing a contract model in accordance with objectives and purposes previously discussed and agreed upon, by both contracting parties, especially in terms of pre-contractual information necessary so that the bank client can decide on the perfection of the contract with adequate and sufficient “knowledge of cause”, as the aforementioned 79 bis of the L.M.V says.”
According to the Ruling of the European Court of Justice of March 3, 2020 on the IRPH clauses in mortgage loan contracts, the defense of consumers and their right to understand the conditions of the contract that include the IRPH clause as a criterion for calculating interest to the detriment of others. We offer a detailed study of the sentence in our article Analysis of the Sentence of the CJUE on IRPH clause.
The language used by the bank in the drafting of the mortgage loan contract must be understandable to the average consumer.
The bank in its dominant position has drawn up the IRPH clause, offering the consumer to adhere to the contract, without the possibility of negotiation.
The use of obscure clauses and the drafting of contracts with consumers that prevent their full knowledge of the obligations they assume is prohibited. Regarding the IRPH clauses, the consumer must understand the calculation criteria agreed in the contract to quantify the remuneration obtained by the bank in the form of interest.
The Spanish court in charge of analyzing the mortgage loan contracts with IRPH with consumers, must judge whether the bank offered due transparency so that the IRPH conditions could be understandable by the average consumer.
The consequences of the declaration of nullity of the IRPH clause can be analyzed in our article Invalidity of the IRPH clause in mortgages.
Start the procedures to claim
If you are affected, please contact us. We are a firm with more than 40 years of history, which studies each case individually. We are not a massive claim platform, our lawyers have extensive experience and we offer you the chance to get to know us personally if you wish.
It may interest you:”Everything you need to know about IRPH”