The first issue thrown up by the ruling of the European Court of Justice against Spanish laws is the incongruence of a country approving a rule issued by Brussels only to subsequently ignore it in practical terms for 20 years. In March 1993, European consumer ministers — include Spain’s — approved Directive 93/13/CEE which, in broad terms, prohibits abusive clauses in contracts between professionals and consumers. In what is an important judgment, the European court notes that the legislative changes in Spain were insufficient and that the Civil Prosecution Law, among others, sanctions disproportionate procedures, and therefore abuse in mortgage foreclosures, by charging exorbitant late payment interest rates, demanding heavy compensation from the debtor for non-payment and by calling in loans ahead of time in such a way as to inhibit judges from overseeing the process and being able to freeze foreclosures according to the circumstances of each case.
The drama of evictions has sparked social alarm in Spain. In 2007, there were 25,943 mortgage foreclosures, while at the end of last year there were 198,116 foreclosure proceedings under way. Not all of these concerned families at the risk of being removed from the only family home and left with debts on occasions greater than those they had contracted. However, many mortgage contracts, if not the majority, contain clauses that, as the European court has just indicated, are abusive and in breach of the directive, which was incorporated into Spanish law in 1995.
Spain’s disregard in this issue has been particularly serious in the past few months given that the ECJ in recent rulings had indicated the incompatibility of the country’s mortgage regulations with European legislation. Thursday’s judgment is a definitive ruling on a question raised by a Spanish magistrate.
Extending the drama to levels beyond what was already unbearable, previous governments and the one currently in power have left legislation in place that favors banks, puts obstacles in the way of and even prevents the exercise of justice, leaving thousands of debtors who acted in good faith homeless. The measures that have been taken, such as the code of good practices established by the banks, and the temporary suspension of evictions, are mere stopgap remedies. However, the European ruling addresses the heart of the issue, and indirectly obliges Spain to protect its consumers according to European standards.
Prime Minister Mariano Rajoy froze the passage through Congress of proposed amendments to the current legislation until the European Court delivered its judgment. Put into perspective, it is lamentable that Spain had to wait for such a heavy legal blow in order to align its legislation with that of Europe and stem the spate of evictions. It is particularly regrettable given that the ruling comes after many months of civil protest by judges and victims’ platforms.
It is not alone, but the Popular Party has dragged its feet to the limit of tolerability. People caught up in foreclosure proceedings who consider themselves victims of abusive clauses will as of yesterday have recourse to a clear legal reference. Lawmakers are compelled to take up the debate again, and following the ECJ directive introduce legislative changes as a matter of urgency. To do otherwise would be to prolong and increase the injustice of requiring a debtor of good faith to seek justice without a legal framework that protects his rights.