At long last, banking clauses that are transparent

For a long time, since the infamous Supreme Court (SC) ruling of 9 May 2013, the SC has mechanically used the «guillotine of transparency» to void contractual clauses drafted in advance within the banking sector, in circumstances in which it was clear that the borrower did not have a legitimate expectation of protection. It is important to highlight the legal doctrine of Judgment no. 538/2019 of the SC of 11 October, which we can consider second of its kind, after the ruling that held transparent IRPH (benchmark mortgage loans indices). This case involved an action to void for lack of transparency of a variable interest clause, which the Court described as follows: «It sets interest periods clearly, differentiating between an initial period for the first six months of the loan, for which a nominal interest of 2.850% per annum is fixed, and subsequent periods, giving the borrower the option in each annuity to choose between two types, namely, the constant interest type, which comprises 36 months, and the variable interest type, which comprises successive revisable periods of six months, establishing the logical rule suppletory to the exercise of the option by the borrower, which in this case results in the assignment of the variable interest type. The clause explains, after setting out those types, [the] interest rates applicable to each type, providing that in both cases it will be the value of the last index that on the previous date closest to the initial date of the period has been published in the Official Journal of Spain (BOE), with the addition of 0.95%».

The legal doctrine of the SC is clear. The clause determining the interest is not unfair, since it is a clause presented in such a way as to make it possible to understand how that interest is calculated. The mere fact that it is a long clause does not in itself mean a lack of transparency if the clause’s lengthiness ensures that the consumer can better understand its legal and financial consequences: in order to assess the lack of transparency it is necessary to ascertain to what extent its inclusion contravenes the requirements of good faith and what significant imbalance in the parties’ rights and obligations it would have produced to the detriment of the consumer.

It is curious – and worthy of applause – that a clause that is considerably more complicated than the interest rate floor clause should be held transparent, without requiring the in-advance drafter to design the clause in such a way that the debtor can «really» know the legal and financial burdens that it entails, without spending unnecessary time and paper in describing various possible and diverse alternative scenarios and without imposing on the consumer a reading of the historical evolution of the interest rates used by the bank.