Last Tuesday, September 10, was certainly an eventful day. The position of the Advocate General of the Court of Justice of the European Union was anticipated regarding a preliminary ruling request, filed by a Spanish court, concerning the interest rate clause of a mortgage loan where the IRPH was the reference index used.
Although it is the Court itself that will have to make a decision to settle the matter, the Advocate General’s qualified position in these proceedings makes their opinion highly relevant. In fact, the EU Court adopts it in most cases. For this reason, and due to the fact that tens of thousands of operations are referenced to this index—many of which have already been litigated in recent years—the anticipation was perfectly justified.
The massive media coverage of the Advocate General’s position since its publication is not surprising. However, for many, including myself, the interpretation of some readings of their report has been a surprise. The need to quickly address relevant news by reflecting its content, coupled with the technical complexity of the legal peculiarities of the case, leads one to believe that some interpretations may have reached certain conclusions, albeit well-intentioned.
Other interpretations are also surprising, and do not deserve the presumption of good intention due to the brazenness with which they distort the content of the Advocate General’s position.
In an attempt to bring some clarity to this entire debate, it is fair to acknowledge that these readings are accurate in stating that the Advocate General considers interest rate clauses—even if they incorporate a normatively configured official index and constitute part of the main subject matter of the contract—to be subject to judicial review under Directive 93/13/EU.
And in this regard, it is true that Spanish courts will be able to review these clauses from both a material and formal transparency perspective. However, does this represent a novelty compared to the actions of our courts of justice in recent years concerning this issue? The answer is no. Indeed, lower courts have analyzed these clauses, issuing substantive rulings generally, with only a minority refraining from such review based on those two arguments. Even the Supreme Court, in its judgment of December 14, 2017, assessed compliance with transparency obligations in the specific case subject to appeal, despite having considered those two circumstances, which would have obviated the review, to be applicable.
However, testimonies have appeared in the media attributing statements to the Advocate General and drawing conclusions from their report that poorly align with reality (which, let us remember, is always very stubborn): that the index is abusive due to its complexity, lack of transparency, or that European justice and the Advocate General have stated that users with IRPH-referenced mortgages should be compensated.
The foregoing statements are, quite simply, false and contrary to the truth.
The banking associations AEB and CECA published a valuation note on the Advocate General’s report on the day in question, which, along with certain considerations about its content, literally reproduced various paragraphs. I encourage you to read it on their corporate websites.
After considering that the assessment of the transparency of these clauses, now clearly possible, falls within the competence of national courts, the Advocate General states that, in their opinion, in the specific case analyzed, the bank complied with the transparency requirement imposed by Directive 93/13/EU, and reasonably explains the process to reach this conclusion.
Firstly, the Advocate General considers that material transparency requires the consumer to be aware of the economic significance of their signature at the time of formalizing the transaction, which in this case means understanding the interest rate formula used in the loan, defined as the sum of the official index used plus a differential. It is vital to highlight here that what must be understood, according to the report, is the interest rate formula, defined in the terms set out, and not the calculation formula of the reference index.
Secondly, and to leave no room for doubt, the Advocate General asks whether, in light of the jurisprudence of the Court of Justice of the Union, it would be necessary to inform the consumer of the methodology for calculating the official index. They answer no, stating that it is sufficient to inform about the definition of the index and its past evolution. This is because, as the IRPH is an official index, methodologically configured in legal norms and published in the Official State Gazette, that information is easily accessible to the average consumer through the norms that configure it, which are also obviously published in the BOE. And the Advocate General ultimately refers to the competence of national judges to examine compliance, by entities in their marketing, with the information obligations of Spanish transparency norms; among these obligations, since 1994, was that of informing the consumer of the evolution of the reference rate used in the 24 months prior to signing.
And thirdly and finally, the Advocate General recalls in their report that in this area of activity, the obligations of banking entities were to provide information, but not advice, from which it is inferred that they are not required to offer clients products referenced to different official indices.
In view of the above, how is it possible to maintain interpretations of the Advocate General’s report so far removed from reality? Here is a diplomatic answer to the question.
Banks are commercial entities that operate for profit. They seek to obtain benefits in their relationships with clients. But always on the basis of continuous relationships over time that presuppose the need for a satisfied client, in addition to having to comply with a series of legal and regulatory obligations, particularly those of information and transparency. In this context of long-term client relationships, upon which Spanish banks have built their business model, litigation is always bad news, because apart from the reputational impact it entails, it means losing the client in most cases.
Now let’s consider the business model of others. Let’s analyze some law firms that formally appear as such or adopt various names and forms to conceal this condition. The proliferation of mass lawsuits is their business model, regardless of the final outcome of those litigations. However, they operate without sectoral client information rules and without remotely complying with those transparency standards in information that they furiously demand in other areas.
And from here, let everyone draw their own conclusions.
Javier Rodríguez Pellitero, Secretary General of the Spanish Banking Association (AEB)
