Provincial Court of the Balearic Islands Declares Mortgage Loan Reference Index (IRPH) Valid: Key Ruling After CJEU Guidance

Key ruling on the Mortgage Loan Reference Index (IRPH) after the latest guide given by the Court of Justice of the European Union (CJEU) to analyze its abusiveness. The Provincial Court of the Balearic Islands has declared the index valid after applying the indications given by the court to determine if this indicator can be abusive for the client.

The Provincial Court points out in its ruling known this Friday regarding the clear and understandable wording of the clauses that, even if there was a lack of transparency, this does not determine abusiveness.

On the other hand, the CJEU, in its judgment of July 13, indicated that the national courts must analyze whether the client was informed of the content of the Bank of Spain circular of 1994 that recommended entities to apply negative spreads on the IRPH so that, when reviewing the loan installment, the difference in price in relation to mortgages with Euribor could be compensated. In this regard, the Court of the Balearic Islands has determined that, according to the literal meaning of the paragraph in question, the serious imbalance that would justify the abuse is not appreciated. The court points out that in the case of agreeing on variable interest according to the IRPH, an official reference index prepared by the Bank of Spain is being applied, the calculation and publication of which is monthly. On the other hand, the Equivalent Annual Rate (TAE) is an indicative indicator resulting from a mathematical formula. Therefore, as reported by the General Council of the Judiciary, “the Chamber concludes that the elements and periods taken into account to calculate one and the other could be different; using the same tense as the suggestion in the preamble of the repealed circular because the Quotation of this does not impose a change in the national judicial doctrine dictated”.

Finally, the Balearic justice does not appreciate bad faith in which the bank offered this index to the client since it is official and is approved by the Bank of Spain.