The Mortgage Loan Reference Index

Our next feature in our series regarding claims against Spanish banks is mortgage interest rates calculated against the IRPH or The Mortgage Loan Reference Index, which was an alternative to the Euribor and is basically another reference for calculation of the mortgage interests. IRPH was sold to the public as a stable and less volatile alternative to Euribor, but resulted to be entirely controlled by the bank entities themselves, being an even more expensive one for customers than the Euribor index. Although, in some sense it is stable: it has always been several points higher than the Euribor and given today’s Euribor historical lows, IRPH is extremely expensive. As an Index it is never fixed, so it should have never been sold as a more stable index than other alternatives.

The Spanish Supreme Court in its judgement dated 22nd of November 2017 declared IRPH completely legal, explaining its decision that as this index is an official one recognised by the Bank of Spain its annulation may question other indexes such as Euribor. Even so, this INDEX was removed from being used by law in November 2013.  However, we should assume that if the INDEX was fair then it would still be in use today.

On the other hand, there are many local judges that are on the side of the European jurisprudence in reference to the consumer´s rights protection and are cancelling some of the mortgages tied to the IRPH index. This question was referred to the European Court of Justice for a preliminary ruling. In the worst case scenario for banks this ruling may cost them 20 billion euros since 2003.

Bank law specialists predict that this situation is of a similar nature to the «cláusula suelo – interest rate floor clause» which could be repeated, if the European Court correct the Spanish Courts decisions.

The strongest argument to attack the IRPH mortgage is it’s lack of transparency & understanding. This was established in the Directive 93/13 regarding an essential clause of the contract, such as the one that sets the variable interest rate of the mortgage loan in the IRPH. It obligates the banking professional to explain to the consumer, before the signing of the contract, the configuration of the reference interest rate, its past evolution and its possible future evolution compared with other indexes.

As well as the multi currency mortgages that Fluent Finance Abroad talked about in the previous edition, this product is extremely complex for the average consumer to understand. This is because of the way it is calculated and because of its peculiar configuration. This makes it difficult for bankers to fully explain the index, meaning the consumer has little or no chance of making an informed decision when deciding which interest rate index to be tied to. As a consequence, this information is rarely, almost never, provided by banks. This oversight from the lenders side can be qualified as misleading for consumers.

This legal position is being maintained and recognised by various legal judgements and as a result, it can be applied to similar cases in order to succeed in demanding nullity of the IRPH index and return the excessive interest which has been unduly charged.

As a company, we believe that mortgages tied to IRPH was miss-sold to mortgage takers and we are taking cases on now on the assumption that the European Court of Justice will overturn the Spanish Supreme Court’s judgement dated 22nd of November 2017 although the process will take its time.

As always, our team of financial advisers and legal experts at Fluent Finance Abroad would welcome any inquiries and will advise accordingly with no financial obligation from the client.

For more information you may contact us on +34 952 85 36 47 or

Miss-selling Claims against Spanish Banks – Could they really be liable for EURO 33 billion worth of claims?

You may or may not be aware but Spanish lenders have been taken to task since the country’s banking and construction industries nearly collapsed as a consequence of the global credit crisis.

Such was the ferocity of the banks actions, that after mass public demonstrations in 2012, law makers in Spain brought in new rules to help protect borrowers and make it harder for lenders to evict (desahuciar) people from their homes.

Since the first set of new consumer protections laws came into force, other lending or selling practices have come under scrutiny and it is now estimated that Spanish lenders could have potentially a total of 33.000 million € (30 billion GBP) worth of claims against them via the Spanish judicial system.

The upshot of this is that if you have had a banking relationship, especially if you have or had a mortgage from a Spanish lender, you may be sitting on a claim where these news consumer protection laws could be used to recoup any money you have been overcharged or get compensation for products you may have been miss-sold via one of the banking institutions in Spain.

In continuation of our series of articles by Fluent Finance Abroad about claims against Spanish banks, let´s have a look on another interesting claim that Spanish lenders are having to contend with.

The claims we are looking at are the mortgage set up expenses or costs which are mandatory when setting up a legally binding mortgage contract witnessed by Spanish notary. These expenses are imposed on the client and normally include mortgage tax (AJD actos juridicos documentados), notary, mortgage registration on the land registry, survey and bank legal processing fees.

Every mortgage in Spain have these set up costs and they have always been paid by the borrower and not by the lender.

In 2015 the Supreme Court has declared abusive to charge all the expenses on the client and lately this year the Court has stated that the client should only be responsible for document duties.

This means that all the mortgage contracts including this clause can be claimed for via the normal legal process, however the amount to be claimed depends on the city where the action is filed and is normally about 3.000 to 5.000 Euros but is dependent on the size of mortgage taken at the outset. The larger the loan the larger the claim could be.

According to the analysts of Kepler Cheuvreux, Spanish people have paid € 26 bln of mortgage opening expenses since 1997, according to their estimation Spanish bank might pay back € 6.5 to € 9.7 bln including interests and costs.

It will come as no surprise to know that all Spanish lenders have contested the Spanish Supreme Courts decision and have referred this case to the European Court of Justice who have yet to give their final ruling on this matter.

This means that claims that are in process are being successful but if the ECJ reverse the Supreme Courts decision, then these claims could come to nothing.

Each case must be accurately studied and it is very important to demonstrate all the mortgage expenses contained in your contract, providing us with the following receipts: Notary, Registry Office, Bank legal processing fees and the document duties payment receipts.

These receipts should have been issued with the title deed but can be obtained and FFA would be able to obtain these if necessary.

Our team of financial advisers and legal experts would welcome any inquiries and will advise accordingly with no financial obligation from the client. For more information please contact Fluent Finance Abroad.

Clausula Suelo – Interest rate floor clause

The clausula suelo is the most common claim against lenders as this clause would ensure that the interest rate you would pay would never go below a certain level which in most cases have been around the 3 – 5.5% mark. Given that interest rates since 2011 have plummeted and that the EURIBOR is actually below zero, this means that you would be paying an extremely high interest rate compared to current market rates.

For example, a client of ours took out a mortgage for 220.000 € back in 2007 with a floor clause of 3.5%, but with a margin above EURIBOR of 1.25. She had been paying 3.5% when she should have been paying 1.25% for the last 6 years.

We calculated that the client had been overcharged by 23.000 € but in the end she ended up recuperating more than 27.000 € given the amount of time it took for the lender to agree to settle out of court and the compensation interest of 4% the bank had to pay on top of the overcharges.

Now that the lender has agreed to take away the “miss-sold” floor clause, this clients’ new monthly mortgage payments are now calculated on the correct interest rate of 1.25% rather than the 3.5% meaning she will continue to save thousands of EUROS per year for the rest of the mortgage term that she signed up to.

This clause was deemed unfair by the European Court of Justice and therefore all mortgage contracts with this clause inserted will be successful with their claim.

Banks however are under no obligation to refund the amounts over charged and it is generally required to take legal action against the lender in question (no S) to ensure the refund is given and the correct amount return plus interest of 4% to 6% as compensation to the injured party.

If you have been approached by your mortgage company offering you a reduction in your interest rate to 2% or above, then you could still reclaim the previous overcharges that have been levied against you.

Chances of a successful outcome are very close to 100% but each case must be studied closely and we would welcome any enquires and will advise accordingly with no financial obligation from the client.

Contact us today. – We look forward to hearing from you.

Multi-Currency Mortgages

In continuation in our series of articles, Fluent Finance Abroad offers a quick insight into another type of mortgage claim, more uncommon than the ones described in our previous series of articles about mortgage set-up expenses and the famous clausula suelo. Today we are talking about Multi-Currency Mortgages, Foreign Exchange Currency Mortgages or as they are named in Spain, hipotecas multi-divisas.

Before the credit crisis, these types of mortgages were being promoted to the general public by various national and international lenders in Spain and the consequences have been dramatic as well as disastrous for many that took these out.

In order to have an idea of what this financial product is, firstly let´s be clear that multi-currency mortgage is not a financial instrument regulated in the Stock Market Law, it is an unregulated high-risk financial product. And that is the main posture that the Supreme Court has defended in its latest judgement 20th of September 2017.

This type of mortgage loan allows for the instalments of the mortgage to be paid in a different currency to that of the country where the loan / mortgage is to be taken, which in Spain is the Euro. Thus, when a multi-currency mortgage is taken out, instead of Euribor, another reference rate is used, which tends to be the Libor, which will be associated with a different currency – Yen, Dollar, Swiss franc or Pounds Sterling to name the most common.

The most important consequence of this change in reference rate is relevant to the total cost of the loan, as well as monthly, quarterly and yearly instalments. Like with the Euribor, the Libor and the currency with which it is associated evolve over time, whereby there can be increases that can make your mortgage loan more expensive, or, on the other hand decreases, which make it cheaper. In this respect, these fluctuations of the currency chosen against the euro will be what conditions the cost of the loan.

Being subject to the foreign exchange market, this type of loan entails high variability or volatility in the final cost of the loan and the amount of the instalments. We can say that these types of mortgages are the opposite of stable.

According to the Directiva (EU Directive) 2014/17/UE Banks have the obligation not only to provide complete and correct information so that the clients understand not only the grammatical sense of the contract, but also the financial risks undertaken by signing the multi-currency mortgage. By not doing so, banks don´t comply with the Directive as well with the well-known “transparency control”.

Multi-currency mortgage product is particularly aimed at customers with strong financial knowledge, as its functioning is somewhat more complex than that of a traditional mortgage based on Euribor. In order the claim to be successful it is necessary to make it clear that the client that has contracted the multi-currency mortgage is an ordinary customer, not a stock market player and had no intention to speculate with differences in the exchange rates.

Moreover, as stated in several judgements of provincial hearings (SAP Santa Cruz de Tenerife Section 4 of 18 January 2017, SAP Valladolid Section 1 of 9 January 2017, SAP Valladolid Section 1 of 9 January 2017, SAP Palma de Mallorca Section 4 of 16 December 2016) the fact that the client once made a change of currency would not demonstrate neither his understanding of this kind of product, nor his acknowledgement of financial risk of multi-currency loans. Therefore, this fact does not suppose any difficulty in getting the estimated demand.

If you took out a Multi-Currency mortgage in Spain in the past and have / have not had problems with the repayment of that mortgage, there is a very strong possibility that the lender will be found negligent by authorising such a complex finance vehicle to an unexperienced currency investor and we urge you to contact us ASAP.

Multi-currency mortgage loans are normally more complicated and complex than the “normal” clausula suelo ones. Each contract must be accurately studied by our team of financial advisers and legal experts. We would welcome any inquiries and will advise accordingly with no financial obligation from the client.


For more information please contact Fluent Finance Abroad on 952 85 36 47 or by email