According to lawyers and legal experts consulted by Europa Press, mortgages linked to the Mortgage Loan Reference Index (MRI) in which such a clause is declared abusive and void shall subsist without accruing any interest in favour of the financial institution.
This is the stance of the party defending mortgage holders, which hopes that the recent decision of the Toledo Provincial Court, which ratified the ruling of the Court of First Instance number 5 of Illescas on a loan from Banco Popular, will be repeated by the highest judicial bodies at provincial level.
This ruling was the first to be successful in the second instance – in favour of the consumer. It considers that the mortgage contract can survive without any interest. The entity will have to return all the amounts of the index declared null. And the client will only return the outstanding capital – essentiality, an interest free loan.
The new decision coming from Toledo on the judicial frontier of the banking industry by income tax has been welcomed with optimism by most lawyers who defend clients who are claiming to have a mortgage linked to this index. The ruling is considered a well deserved “punishment” for a sector that has long been considered to be acting without total transparency.
The European Court of Justice’s (ECJ) ruling of 3rd of March 2020 states that the personal income tax should be subject to control of transparency by national judges, while the general consequence of a declaration of invalidity is that it will be deemed not to have been made.
As a general rule, terms declared void for lack of transparency should not be replaced because doing so would avoid the dissuasive effect.
A proper ruling on personal income tax – according to experts
Adicae lawyer Francisco Javier Jimenez Chacon, also believes that this is the ruling that best meets the criteria established by the European Court of Justice. So that the bank that failed to comply is not only punished with the change to the index that should have been established in the first place, but an additional sanction is applied: the non accrual of interest.
The European Justice pointed out the possibility of replacing it with a legal provision – or in this case with another legal index, such as Euribor or even Entity Income Tax – if the contract could not survive without such a clause, leading to a possibly worse result for the client.
However, the Commercial Code states that a loan can be free – unless the parties agree otherwise, so no regulation prohibits the mortgage can subsist without being onerous.
Cristina González Piñeiro, the legal director of Reclama Por Mí, has also indicated that the loan should be referenced to zero interest. Since the substitution to another index could be detrimental to the client. “We believe that this ruling is the one that best meets the criteria set by the ECJ and that it complies fully with the provisions of the ruling,” she added.
For the president of ASUFIN, Patricia Suarez, the fact that income tax litigation is settled with unpaid loans is the “fair” position. Otherwise, there would be no dissuasive effect for the entity, as established by the European Directive on unfair terms in consumer contracts.
The great disparity of criteria when interpreting the ruling
In any case, there is still a great disparity of criteria on the part of the various courts and provincial hearings in interpreting the Luxembourg ruling, which has been called upon to clarify its conclusions.
On the 11th of May 2020, the magistrate of the 38th court of instruction of Barcelona, Francisco González de Audicana, who asked Luxembourg for a preliminary ruling on personal income tax, sent an order in which he determined the need to re-interpret the scope of the control of transparency and its consequences if it turns out that the information to the consumer was insufficient.
Gonzalez de Audicana considers that the European Court’s ruling does not fully resolve the doubts. Above all, because after it was made public, almost thirty judgments have been handed down annulling the index and another fifthteen declaring it valid.
How the situation will resolve itself is still to be seen.
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