Article written by Jesús Picossi Ávila, practising lawyer, member of the Malaga Bar Association, Nº 8254
In our professional office, we can obtain for you, the extrajudicial or judicial declaration of the nullity of the opening commission of your mortgage loan, obtaining the refund of the total amount of said commission, together with the legal interests accrued from the date of the undue payment of said monetary amount. The following is an explanation of this matter.
What is the origination fee of a mortgage loan?
The opening commission of a mortgage loan is the monetary amount that the subscriber of a loan pays to the lender financial entity that grants the loan when subscribing the same, normally consisting of the payment of a percentage of the capital of the granted loan, being able to also consist of the payment of a fixed amount.
This commission remunerates the services rendered by the bank, in order to collect the financial information of the applicant for the loan, studying the solvency of the same in order to grant the corresponding loan.
What are the requirements for the origination fee to be valid?
The validity of the origination fee according to the latest European and national jurisprudence is not automatic. The courts will have to assess whether the clause complies with the corresponding requirements of transparency and non-abusiveness (control of transparency and content), in order to decree the validity of the clause.
The arrangement fee must be transparent in two ways:
- In terms of its inclusion in the contract (formal transparency), that it is accessible, legible, and does not appear to be hidden within a rambling and incomprehensible financial information.
And as for the information provided to the borrower (material transparency), i.e. that the customer is aware of the specific services remunerated by the corresponding commission, knowing the economic consequences of its application, and that the financial institution complies with the sectoral and current regulations established in this regard, such as the Ministerial Order of 5 May 1994 and the subsequent Order EHA/2899/2011 of 28 October. - Furthermore, the arrangement fee must not be abusive: In other words, as it constitutes a general contracting condition, which means that it has not been negotiated and has been imposed on the consumer, this clause must not lead to an imbalance in the rights and obligations of the parties, it cannot impose disproportionate obligations and charges on the borrower.
What is the nullity of the origination fee of a mortgage loan?
The nullity of the arrangement fee consists of rendering this fee null and void in a mortgage loan contract, as this clause is not valid, as it has not passed the transparency and/or abusivity control.
What are the consequences of the nullity of the origination fee of a mortgage loan?
The consequences of the nullity of the arrangement fee are established in article 1.303 of the Civil Code, and consist of the refund of the amount unduly paid as an arrangement fee, together with the legal interest accrued on said amount, from the time of the undue payment of said fee until the time of the refund of the same.
We will now proceed to analyse the latest and current case law on the arrangement fee, which overturns and qualifies the previous case law of our Supreme Court:
Analysis of the Judgment of the Court of Justice of the European Union of 16 March 2023, Case C-565/21.
This European ruling clarifies some somewhat obscure aspects in relation to the arrangement fee, reaching the following conclusions:
- The arrangement fee does not form part of the main object of the contract, which is why this clause is susceptible to an analysis of unfairness by the Courts, and not only of transparency.
- The opening commission should be subject to a transparency analysis by the Courts, as such transparency is not automatic in the case of this clause. The literal wording of the clause in the contract, the information provided by the lender to the borrower, and the information provided should be in accordance with the sectoral regulations established on banking transparency, must be taken into account.
The arrangement fee must be subject to a content analysis by the Courts, based on the specific case, in order to assess whether the clause constitutes an imbalance in the rights and obligations of the parties.
Analysis of the Spain´s Supreme Court Ruling 816/2023 of 29 May
In this ruling, our High Court proceeds to adapt its jurisprudence to that established in the previous ruling of the CJEU of 16 March 2023, modifying its previous criterion regarding the arrangement fee. In this latest and important ruling, the Supreme Court reaches the following conclusions:
The services remunerated in the arrangement fee are inherent to the granting of the loan, and are listed in the sectoral regulations governing the arrangement fee. Arguing that the lack of proof on the part of the financial institution in relation to the specific services provided in relation to the remuneration of the arrangement fee does not imply a lack of transparency, in accordance with the case law of the CJEU. This case law does not require the courts to carry out such a transparency check.
The Supreme Court confirms the validity of the Opening Fee, as it complies with the transparency requirements established in the Ministerial Order of 5 May 1994. And as the nature of the services provided was understandable, the financial burden was known, and there was no overlapping of fees, as there was no loan study fee or similar, apart from the arrangement fee.
Likewise, it is confirmed that the amount charged for the arrangement fee is not disproportionate, as the fee applied was 0.65% and is within the average cost of the arrangement fee in Spain, which is between 0.25% and 1.50%.
Taking into account the last conclusion of our Supreme Court specified above, it can be concluded that a sensu contrario. That the arrangement fee, which exceeds a cost of 1.50% of the capital granted in the subscribed loan, is an abusive and disproportionate fee, and therefore null and void.
Other courts are currently reaching this conclusion. Among them, the Sixth Section of the Provincial Court of Malaga, in its Ruling No. 1647/2023, of 30 November 2023, Appeal Rollo 1162/2022. In which this lawyer has intervened professionally, representing his consumer clients, obtaining a favourable judgement in their interests, having declared the nullity of the opening commission for abusivity.
Analysis of the Judgment of the Sixth Section of the Provincial Court of Malaga, No. 1647/2023, 30 November 2023, Appeal Rollo 1162/2022. Judgment obtained by this professional office.
In this professional office, we have intervened professionally, until obtaining the final judgement specified above, in favour of the interests of our clients.
This judgment analyses the latest case law, both national and European, issued in this regard, which has been summarised above. It states that the application of an arrangement fee of 2% is abusive, stating at the end of its second ground of law, literally as follows:
‘It should be borne in mind with regard to the control of content that the Court of Justice of the European Union, in its judgment of 16 March 2023, assumes that the arrangement fee is not per se abusive, without prejudice to the fact that the competent national court must verify that:
(i) the services provided as consideration cannot reasonably be considered to be provided within the scope of the services described above;
or (ii) that the amount to be paid by the consumer for the said commission is disproportionate in relation to the amount of the loan, the Supreme Court ruling having stated that, according to statistics on the average cost of arrangement fees in Spain accessible on the Internet, this cost ranges between 0.25 and 1.50%; therefore, in principle, commissions within this range would not be considered abusive.
Having said that, having established the parameters to be followed in order to determine whether or not we are in the presence of an abusive clause, it should be pointed out that in our case analysed in the public deed from which the mortgage loan was granted on 23 July 2003, clause 4 under the heading ‘commissions’ states that:
the loan accrues an arrangement fee, which in this loan amounts to two thousand nine hundred euros (2,900.00 euros), the payment of which has been made by the client prior to this act’. As can be seen, this is not entirely in line with the arguments on the validity of the clauses set out by the Spanish High Court in the aforementioned judgement. Since the loan capital was for an amount of 145,000 euros and the arrangement fee exceeds the maximum limit of 1.50%, which leads us to the dismissal of the appeal in this specific section’.
Therefore, to summarise and simplify the doctrine of this judgement of the Provincial Court of Malaga. An arrangement fee that exceeds a cost of 1.50% of the capital loaned, exceeds the average cost of said fee, and is therefore abusive and null and void.
How to claim the nullity of the origination fee of a mortgage loan?
In our professional office, we study the viability of your case, free of charge and without obligation. And if the claim is feasible, upon request of the client, we will request the necessary documentation to be able to claim, charging when the client is paid.
