European Court of Justice Declares the IRPH Null and Void if There Has Been a Lack of Transparency

The CJEU in a recent judgment, has established that the IRPH can be declared null and void if the bank does not prove that it has explained to the client how the interest rate works and had not presented different scenarios on the evolution of the interest rate.

Judges cannot generically declare the IRPH null and void on all mortgages. The judge must analyse case by case to verify if; the bank duly informed the client of the system of the IRPH and if the client understood it.

We understand that in most cases it is very difficult for the bank to prove that it duly informed the client. It is for that reason that is expected that the bank cannot prove that there was the necessary transparency.

Once the nullity of the IRPH has been declared, the corresponding Judge will have to decide whether to replace it with the Euribor or simply leave the differential in the mortgage as an interest rate -0.25% or 0.5% in most cases.

Depending on the criteria adopted, it could condemn the bank to pay the difference between the interest paid and the interest resulting from the new interest rate, which on average would see savings for the mortgage holder of between €15,000 and €20,000.

Although a judicial outcome can never be assured, this new ruling gives hope many that consumers who have IRPH on their mortgages can recover overpaid money and see their future mortgage payments reduced.

For further information or to seek a free consultancy with a lawyer who has expertise in bank products, email: info@citizensadvice.org.es

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.