Significant Preliminary Ruling on Unfair Terms: Case C-265/22 ZR PI against Banco Santander SA

Among the significant number of preliminary rulings relating to unfair terms in recent months processed by the Court of Justice of the European Union (see e.g., CJEU June 8, 2023, case C-570/21, Dalloz actuality, 13 June 2023, observations C. Hélaine; D. 2023. 1117 ; CJEU, 9^e ch., April 20, 2023, aff. C-263/22, Dalloz news, May 15, 2023, obs. D. Bazin-Beust; D. 2023. 780 ; Feb 2 2023, aff. C-208/21, Dalloz news, February 7 2023, obs. C. Hélaine; D. 2023. 292 ; D. Bazin-Beust, Law in debate, February 15. 2023), it will be necessary to remember case C-265/22, ZR PI against Banco Santander SA. The case also gave rise to A press releasewhich the Court reserves for a fairly small number of its judgments.

The facts giving rise to the preliminary reference take place in Spain. On May 12, 2006, two people concluded a mortgage loan with a banking establishment for a sum of €197,934.54. Section 3 bis of the contract includes a variable interest rate. The new rate must be determined every twelve months until the end of the said contract in relation to a reference rate (the IRPH of credit institutions, increased by 0.20 percentage point) or a substitution rate (the IRPH banks increased by 0.50 points). On February 13, 2020, borrowers enter the Court of First Instance no. 17 of Palma de Mallorca (the Court of First Instance No. 17 of Palma de Mallorca, Spain) in order to obtain the nullity of the disputed clause due to its abusive nature. They consider that the disputed clause is misleading since it could imply a limited increase in the rate when the reality shows a significant increase in it. The damage suffered from the application of the clause amounts to a sum of €39,799.25 for the borrowers according to their conclusions. The banking establishment considers the clause perfectly legal and accessible for the reasonable consumer. The Majorca court specifies that it encounters difficulties in resolving this dispute without the interpretation of the Court of Justice, in particular regarding Directive 93/13/EEC but also Directive 2005/29/EC on unfair commercial practices. One of the complex points lies in a circular 5/1994 of Spanish law which requires, without however having normative force, in this type of situation where a variable rate loan includes as a reference rate an IRPH to provide for theapplication of a negative differential and not a positive differential. However, consumers argued that there was no information given regarding the content of the preamble to this circular. The Spanish court therefore decides to stay proceedings to ask the Court of Justice five questions:

« 1) Given the fact that the development of [l’IRPH des établissements de crédit] includes commissions and differentials [appliqués] at nominal rates, so that[il] represent[e] a heavier burden for the consumer than other APRs on the market, and taking into account the fact that, according to […] circular 5/1994 […] – which constitutes the normative criterion of the supervisory body –, these differentials must be negative, a requirement which has been omitted and largely ignored by financial entities, the fact of completely deviating from the normative criterion of the supervisory body is is it contrary to Articles 5 and 7 of the directive [2005/29] ?

2) If it is established that deviating from the aforementioned normative criterion is contrary to Articles 5 and 7 of the Directive [2005/29]in accordance with the case law of the Court […] in the matter…