The Verdict of the Supreme Court, at the first Plenary Session on 30-06-2015, nº 323/2015, and the subsequent one on 15-11-2017, nº 608/2017, that changed the reasoning about the nature of the regulations applicable to this type of mortgage loan, set out the basis in jurisprudence for the resolution of legal cases regarding multi-currency loans.
The verdict mentioned above, of 30-06-2015, in the Seventh definitive judgement, starts by establishing the general concept and the characteristics of multi-currency loans in the following terms:
“3.- That which has been colloquially known as a ‘multi-currency loan’ is a mortgage loan with variable interest in which the currency in which the payment of the capital and the periodic repayments are made is one of several possibilities, from which the borrower can choose, and in which the reference index that applies to determine the interest rate applicable during each period is normally different to the Euribor, and tends to be the Libor…”
I.- Complex, high-risk product.
Multi-currency loans have more risks associated with them than traditional loans in euros and, as well as possible increases in the reference index, they are also vulnerable to changes in listings and alterations to the interest rates related to said currencies. That means that the financial organisation is obliged to provide adequate, precise, truthful and sufficient information, during the pre-contractual and contractual phase. Concretely, the bank, when offering the product, should provide information about the following risks, amongst others:
- Risk of exchange rate of the applicable currencies.
- Risk of interest rate of the reference index used.
II.- Adhesion contracts.
These are adhesion contracts in which the clauses or stipulations have been created, pre-formulated and imposed by the financial organisations, with no client participation. As such, they are governed by Law 7/1998 of General Terms and Conditions when they are used. In consumer contracts all of the rules applying to abusive clauses in the General Law for Consumer Defence apply, so extra transparency controls should be in place.
III.- This is not a financial tool according to the MIFID.
The ruling mentioned above, of 30-06-2015, nº 323/2015, declared that the multi-currency mortgage, as well as being a mortgage loan, is a complex, high-risk financial tool, being, and is therefore, subject to the Law 47/2007, of 19th December 2007, on the Stock Market, which transposed the Spanish legal order of the Directive 2004/39/CE, known as MIFID.
The subsequent STJUE, of 03-12-2015, Banif Plus Bank case, C-312/14, declared against it, changing its own doctrine established in the STJUE, of 30-04-2014, C-26/13, that the multi-currency clauses are not a financial tool, regulated by the Stock Market Law, independent of the mortgage loan.
This new criteria, that the MIFID regulation does not apply to multi-currency mortgage loans, has also been adopted by our Supreme Court in the ruling of 15-11-2017, nº 608/2017. However, it should be underlined that the non-application of the MIFID Directive to these contracts does not mean that the multi-currency mortgage loan is considered a complex product, meaning that the increased transparency checks of Directive 93/13 can be done into abusive clauses in contracts concluded with consumers.
IV.- Application of Directive 93/13: Increased transparency checks.
The ruling mentioned above, of 15-11-2017, nº 608/2017, following the new criteria of the TJUE, endorsed by the STJUE, Second Session 20-09-2017, in accordance with article 4, section 2 of the Directive 19/13 on abusive clauses in contracts concluded with consumers, states that if the clause included in a loan contract in a foreign currency has not been negotiated individually then the loan should be repaid in the same foreign currency in which it was contracted. It states that this is the main goal of the contracting of the loan, as the clause regulates something which characterises the contract, so its abusive nature could be examined according to the Directive.
Due to this, our Supreme Court, in the ruling mentioned above of 15-11-2017, nº 608/2017, declared the partial nullity of a multi-currency mortgage loan for abuse due to the lack of transparency, adopting the doctrine of the Court of Justice of the European Union. But, at the same time, it stated that the non-appliance of this Law does not mean that they are not risky, complex products that are subject to transparency controls, meaning the borrower has the legal rights of a consumer.
V.- Partial nullity of the mortgage loan.
The consequences that the nullity of a multi-currency clauses has cannot be applied to the whole of the contract, but just the litigious multi-currency clause. The judgement of the total nullity of the contract would be contrary to the jurisprudence of the TJUE which has the aim of protecting consumers.
As a consequence, the partial nullity of a loan has to be declared, removing the multi-currency clause and recalculating the repayment schedule in Euros according to Euribor plus the difference agreed upon, with the resulting return to the client of the possible excess interest charged and the repayment of the corresponding capital as a result of the change of currency.