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In the Spanish case referred to the CJEU, consumers' interest rate was calculated with reference to the Mortgage Loan Reference Indices (IRPH). Consumers claimed that they were not informed as to the full impact of having such a reference rate, with relevant information either missing from the mortgage loan agreement or not being properly communicated to them. Whilst the Unfair Commercial Practices Directive was not yet applicable at the time the mortgage loan contract was concluded (2006), the Court could not consider whether the bank engaged in a misleading commercial practice. It was, however, able to assess that the UCTD may have been infringed if the bank's practice did not allow for applying to the IRPH a negative margin, in order to align the interest rate with the market rate.
The CJEU reiterates the main points on transparency from the Andriciuc and Others judgment (see our comment): Consumers require sufficient information to take prudent and well-informed decisions; mainly average consumers need to be able to estimate the total cost of the loan (para 53). This translates into an obligation, when variable-rate mortgage loan contracts are concluded, for average consumers to understand: the specific functioning of the method used for calculating that rate (para 55). This requires consumers to have easy access to the main elements relating to the calculation of the reference index (para 56). The national court in the given case needs to check whether the information provided in the agreement (with the index being published by the Bank of Spain and having been described in Annex VIII to the agreement) was sufficient for average consumers to become aware of the method of calculation of the variable interest rate (paras 57-58). Further, the national court should consider whether the lack of information in the loan agreement on a non-binding circular issued by the Bank of Spain could have been detrimental to the average consumer's ability to estimate the total loan cost. This in light of the circular stressing its significance for credit institutions (para 59). The CJEU seems to imply in para 60 that it would go to far to expect average consumers to conduct legal research, that is to try to find other documents of the Bank of Spain that could be applicable to the variable-rate mortgage loans, which have not been referenced in the agreement.
Whilst the CJEU reiterates the finding from the order in Gómez del Moral Guasch that the lack of transparency of a term does not render it, in itself, unfair, it would weigh in on the unfairness test (para 66). Further, the national court, when estimating whether the contract term introduces significant imbalance between parties' rights and obligations, has to look at what rules would apply in the absence of the agreement and assess to what extent the contractual provisions put the consumer at a detriment (Banco Primus - see our comment). With variable-rate mortgage loans this means comparing the interest rate to the statutory interest rate and the interest rates applied on the market at the date of conclusion of the agreement at issue... for a loan of a comparable sum and term (para 65).
UPDATED:
Readers interested in finding out more about the intricacies of the financial indexes used in Spain for calculating variable-rates in mortgage loan contracts, the legal value of circulars issued by the Bank of Spain, and the possible misconstruction of Spanish law by the CJEU - please check the comment of Prof. Ernesto Suárez from ESADE and UPF Law Schools in Spain.
