Over recent years costumer protection has suffered a spectacular increase, since, for years there were certain standards (Spanish and European) that protected costumers in a high degree. Those of us who have spent time studying costumer law and going to Courts could see how again and again these aforesaid standards were not applied, and I think that it is due to ignorance and distrust by a large part of the Judges.

However, as a result of the mortgage claims, the system revolved completely and the judges initiated a new trend of costumer defence, which was expanded in a short period of time.

And that was the context we had when the Supreme Court of Justice of Spain (using as an excuse the impact that the refund of the amounts improperly charged from the beginning would have in the financial system) tried to reduce the rights of costumers, by temporarily limiting the effects of the base clauses. The Court of Justice of the European Union (CJEU) was responsible for amending this position, although along the way the banks saved millions of euros and many costumers were frustrated because of their fake expectations to collect what they deserved, by application of the principle of res judicata. The credibility of the Supreme Court was exposed and this interpretation in favour of the interests of the bank (which had not happened before) was about to generate a financial and asset responsibility to the State, due to the high amounts they would have had to refund to compensate for the abuses of the mortgage-issuing banks (through the payment of higher taxes) thanks to the High Court.

It seemed that the initial shock had taken effect and the Supreme Court began to accept a great part of the costumers’ claims.

In this atmosphere of consumer euphoria (encouraged by law firms that saw a new and very lucrative business) the analysis of the IRPH index arose. Such analysis had been annulled by many Provincial Hearings before and the Supreme Court declared it valid this time, which made many entities avoid returning large amounts of money. This month the CJEU is analyzing the validity of this index, much higher than the Euribor index, which used to be considered very dark and was accused of having been manipulated by the entities.

And the main point of the claims (at least by number) is the one concerning the mortgage expenses. The rate of court decisions that have declared the abusiveness of this clause that imposed its payment to consumers exceeds 90%.

There was initially a more or less clear jurisprudential position, according to which the consumer was required to pay the taxes and the entity would pay for the costs of notary, registry and management. Regarding the valuation expenses there was no fixed criterion.

And such position has recently changed, after the amendment made by the Third Chamber of the Court of Justice (which is not the one that resolves civil processes, but administrative ones), and the payment expenses is now imposed to the bank. This unexpected change caused another unprecedented situation, in which the plenary session of the Third Chamber changed its own criteria, returning to the original interpretation, which favoured the criterion of the banks. This last minute jurisprudential change and its lack of logic damaged again the credibility of the Supreme Court, leaving it at the worst moment of its existence.

However, under these circumstances of return to the original interpretation, favourable to banks, despite the criterion supported by hundreds of judgments of the Supreme Court, and with no further news about it, on January 23rd, the same Court has changed its criteria again, imposing the banks to pay only half of the costs of notary and Registry and, the rest (administration and assessment), to the costumers.

Finally, regarding the opening commission which was generally the second most relevant concept after taxes), despite having a unanimous criterion of nullity, in this last amendment they have excluded its analysis out  of consumer law, and with that the banks are going to avoid the refund of a very high amount of money.

Therefore, an average claim, which initially entailed a refund to the client of about € 6000, has been reduced to approximately € 400.

With all these interpretive changes (made with techniques expressly forbidden by the European Justice), the Supreme Court has managed to lower the expectations of costumers, while trying to reduce the number of claims and, as a consequence, relieving the courts that (in order to avoid the general saturation of the judicial system) had to be created expressly and that are currently collapsed. The income statements of the banks experienced a very positive recovery.

The only hope we, as costumer, have left  is that the European Court amends the Supreme Court’s decision again, declaring the nullity of the indiscriminate clause that imposes all costs on the costumers, as well as the nullity of the opening commission, by applying the  European community regulations.

The problem is that, until then, a large number of claims will be dismissed and will be forgotten along the way, without any appeal presented (causing undeserved benefits for banks) and it is very likely that, due to the notoriety of the mistake and the technique used by the Supreme Court, the Spanish State was then declared liable. If such is the case all of us will end up assuming the costs of the refund and commission of opening that the banks improperly charged in the past (and many of those banks were rescued with public money, of which only a part has been returned). At that time it is possible that many of the members of the First Chamber of the Supreme Court will no longer occupy their position and that any attempt of responsibility will vanish, despite the clarity with which this issue is presented to us today.

Over recent years costumer protection has suffered a spectacular increase, since, for years there were certain standards (Spanish and European) that protected costumers in a high degree. Those of us who have spent time studying costumer law and going to Courts could see how again and again these aforesaid standards were not applied, and I think that it is due to ignorance and distrust by a large part of the Judges.

However, as a result of the mortgage claims, the system revolved completely and the judges initiated a new trend of costumer defence, which was expanded in a short period of time.

And that was the context we had when the Supreme Court of Justice of Spain (using as an excuse the impact that the refund of the amounts improperly charged from the beginning would have in the financial system) tried to reduce the rights of costumers, by temporarily limiting the effects of the base clauses. The Court of Justice of the European Union (CJEU) was responsible for amending this position, although along the way the banks saved millions of euros and many costumers were frustrated because of their fake expectations to collect what they deserved, by application of the principle of res judicata. The credibility of the Supreme Court was exposed and this interpretation in favour of the interests of the bank (which had not happened before) was about to generate a financial and asset responsibility to the State, due to the high amounts they would have had to refund to compensate for the abuses of the mortgage-issuing banks (through the payment of higher taxes) thanks to the High Court.

It seemed that the initial shock had taken effect and the Supreme Court began to accept a great part of the costumers’ claims.

In this atmosphere of consumer euphoria (encouraged by law firms that saw a new and very lucrative business) the analysis of the IRPH index arose. Such analysis had been annulled by many Provincial Hearings before and the Supreme Court declared it valid this time, which made many entities avoid returning large amounts of money. This month the CJEU is analyzing the validity of this index, much higher than the Euribor index, which used to be considered very dark and was accused of having been manipulated by the entities.

And the main point of the claims (at least by number) is the one concerning the mortgage expenses. The rate of court decisions that have declared the abusiveness of this clause that imposed its payment to consumers exceeds 90%.

There was initially a more or less clear jurisprudential position, according to which the consumer was required to pay the taxes and the entity would pay for the costs of notary, registry and management. Regarding the valuation expenses there was no fixed criterion.

And such position has recently changed, after the amendment made by the Third Chamber of the Court of Justice (which is not the one that resolves civil processes, but administrative ones), and the payment expenses is now imposed to the bank. This unexpected change caused another unprecedented situation, in which the plenary session of the Third Chamber changed its own criteria, returning to the original interpretation, which favoured the criterion of the banks. This last minute jurisprudential change and its lack of logic damaged again the credibility of the Supreme Court, leaving it at the worst moment of its existence.

However, under these circumstances of return to the original interpretation, favourable to banks, despite the criterion supported by hundreds of judgments of the Supreme Court, and with no further news about it, on January 23rd, the same Court has changed its criteria again, imposing the banks to pay only half of the costs of notary and Registry and, the rest (administration and assessment), to the costumers.

Finally, regarding the opening commission which was generally the second most relevant concept after taxes), despite having a unanimous criterion of nullity, in this last amendment they have excluded its analysis out  of consumer law, and with that the banks are going to avoid the refund of a very high amount of money.

Therefore, an average claim, which initially entailed a refund to the client of about € 6000, has been reduced to approximately € 400.

With all these interpretive changes (made with techniques expressly forbidden by the European Justice), the Supreme Court has managed to lower the expectations of costumers, while trying to reduce the number of claims and, as a consequence, relieving the courts that (in order to avoid the general saturation of the judicial system) had to be created expressly and that are currently collapsed. The income statements of the banks experienced a very positive recovery.

The only hope we, as costumer, have left  is that the European Court amends the Supreme Court’s decision again, declaring the nullity of the indiscriminate clause that imposes all costs on the costumers, as well as the nullity of the opening commission, by applying the  European community regulations.

The problem is that, until then, a large number of claims will be dismissed and will be forgotten along the way, without any appeal presented (causing undeserved benefits for banks) and it is very likely that, due to the notoriety of the mistake and the technique used by the Supreme Court, the Spanish State was then declared liable. If such is the case all of us will end up assuming the costs of the refund and commission of opening that the banks improperly charged in the past (and many of those banks were rescued with public money, of which only a part has been returned). At that time it is possible that many of the members of the First Chamber of the Supreme Court will no longer occupy their position and that any attempt of responsibility will vanish, despite the clarity with which this issue is presented to us today.

Venancio Parra Torres

Doctor in Law