Con­cern­ing the ad­visory opinion of the EFTA Court

24 May 2024

Today, the EFTA Court delivered an advisory opinion regarding interpretation of certain provisions of EU directives relating to consumer housing mortgages. The directives have been incorporated into the EEA Agreement and transposed into Icelandic law by acts of Parliament. The opinion was delivered at the request of district courts for two court cases that have been brought against Landsbankinn, on the one hand, and Íslandsbanki, on the other. The cases concern contractual provisions governing the grounds for interest rate changes on housing mortgages.

The EFTA Court does not rule on the validity of provisions governing interest rate changes for housing mortgages in Iceland, as this is the role of the Icelandic courts.

The opinion of the EFTA Court includes an interpretation of the provision of the Mortgage Credit Directive no. 2014/17/EU, which stipulates the conditions for interest rate changes for housing mortgages. This provision has been implemented into Icelandic legislation, i.e. Act no. 118/2016 on Mortgage Lending to Consumers. However, the Icelandic Act also contains an additional rule on conditions for interest rate changes that are not included in the Mortgage Credit Directive.

The Court's advisory opinion concludes that the use of elements other than reference indexes or reference rates for determining interest rate changes is possible, noting that requirements for clarity, accessibility, objectivity and verifiability should also apply to such elements. Furthermore, the Mortgage Credit Directive requires that terms and information provided to the consumer must be formally and grammatically intelligible, enabling the consumer to understand the methods used for determining interest rates and evaluate the economic consequences of the agreement for him or her. The Court's decision does not provide that the provision on interest rate changes in Landsbankinn’s housing mortgages is against the aforementioned requirements. It is the Bank's opinion that the requirements of Icelandic legislation in this regard are met.

The opinion also includes an interpretation of Directive 93/13/EEC on unfair terms in consumer contracts. This Directive provides for detailed disclosure requirements and clear, objective and intelligible criteria, so that the consumer can assess the consequences of terms concerning financial obligations. The EFTA Court does not conclude on whether Landsbankinn has complied with these requirements, noting that this is for Icelandic courts to decide and to evaluate the impact if requirements are not met. It is the Bank's opinion that these requirements are met.

The court case in question against Landsbankinn will now continue before the District Court of Reykjavík.

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