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Supreme Court has final say on bankers’ acceleration of consumer mortgages

24 de septiembre, 2019

The Judgment of the European Court (Grand Chamber) of 26 March 2019 in Joined Cases C-70/17 and C-179/17 allowed the national court to compensate for the invalidity of an unfair clause by replacing that clause with the new wording of the legislative provision on which it was based (specifically, Art. 693(2) of the Spanish Civil Procedure Act 1/2013), provided that the mortgage loan contract in question was not capable of continuing to exist without the said unfair clause and that complete voidness of the contract as a whole exposed the consumer to particularly unfavourable consequences. In addition, the Order of the Court (First Chamber) of 3 July 2019 in Case C-486/16 held that once a mortgage enforcement was discontinued due to the unfairness of the accelerated repayment (acceleration) clause, the creditor could make a second application for enforcement against the same borrower, although not on the basis of the acceleration clause (void) but on the basis of the debtor's continued default at the time the second application was made.

Judgment No. 463/2019 of the Supreme Court (SC) of 11 September seeks to implement the European decisions and to settle once and for all the already lengthy question of whether foreclosures can commence or continue when the contractual acceleration clause is unfair because it does not provide the debtor with a sufficient "cushion" of defaults before leading to repossession. Said judgment makes long digressions on matters that are not decisive, but finally we can extract from it two fundamental arguments. First, that the mortgage loan does not subsist, in an objective sense, without the acceleration clause, so that partial voidness of the acceleration clause and simultaneous subsistence of the consumer loan is untenable. Secondly, that the suppletory provision to which to resort in order to fill the voidness of the clause is Art. 24 of the Real Estate Credit Contracts Act 5/2019 of 15 March (LCCI), whether or not Transitory Provision 1(4) LCCI applies. Neither of the two statements is incontestable in law and the second carries with it procedural problems, but, as formulated, they grant mortgage creditors an unchallengeable victory, which they themselves might not have expected. However, one should recall that the “Audiencia” orders refusing enforcement proceedings are unappealable at the Supreme Court and the latter’s "instructions" are not binding on the court a quo. Is the end of the chaos in sight?

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