Scott Tucker was the protagonist of a financial deception through the contracts of his company, AMG Services, of short-term loans. The wording of these documents made consumers think that they were contracting something very different from what they were actually signing. When payments came in, customers thought they were paying back the credit. In reality, what they paid were commissions, while the principal was maintained and, therefore, continued to generate interest.
In addition, when customers tried to pay, already in a default situation without knowing it beforehand, repayment commissions were generated.
The Justice of the USA did not tremble and the supervisory bodies sanctioned with millions in fines and those involved were criminally convicted.
There are strong similarities between Tucker’s short-term loans and price-referenced mortgages. IRPH. Both have an incomprehensible contractual wording, an alleged deception based on commissions and the application of extra-financial arguments, those used by both the bank and the Supreme Court, to justify it.
During the trials, Tucker’s lawyers pointed out that although the contracts were convolutedly worded and riddled with sentences that provided no information, the terms of the loans could be gleaned from it, and they were correct. Does it ring a bell?
Mortgages referenced to IRPH usually have a convoluted contract wording. Unlike Tucker’s loans, however, the conditions are not correct. In any IRPH contract it can be seen how the wording is hiding that what the consumer was really contracting was a effective rate instead of a nominal rate.
In addition, the use of financial terms unknown by the average consumer, framed in a complex productcaused families to take out mortgages that, as has been shown, have been highly detrimental to their economy.
Returning to the trial against Tucker, his lawyers used extrafinancial arguments like, for example, that the company was owned by an Indian tribe because Native Americans are exempt from certain laws.
In Spain, with the IRPH, the presentation of this type of argument is more serious, because it has not only been presented by the defense of the financial institutions that sold this type of mortgage, but has also been assumed and defended by the supreme court.
Specifically, the extra-financial argument used in Spain is the fact that the information on the IRPH is published in the BOE and that this is enough for the average consumer to understand what he was contracting. That is, it is a way of recognize that the mortgage contract was not correct but if the IRPH victim had bothered to read the BOE, they would not have been deceived.
As indicated in the Study on the Financial Imbalance in IRPH Hiringpublished by the General Directorate of Consumption of the Ministry of Health and Consumption of the Government of the Balearic Islands, “This argument is not true. That is to say, it will not help an average consumer to go to the BOE because, from reading it, he cannot detect the fundamental condition on which the imbalance is based: the pass off an effective rate as a nominal rate […] “Effective rates” (or equivalent annual rates) are data with higher values than nominal rates (or simple rates). In other words, in any mortgage contract you can check how the initial interest is, for example, 5%; Then, below, you will see that your APR (effective rate) is 5.68%. Therefore, it is fraudulent for a contract to indicate that the average of the nominal rates of the entities will be taken as a reference, but, at the moment of truth, the effective rates (higher than the previous ones) are taken.
The similarities between the case of Scott Tucker and that of the IRPH are evident. However, the behavior of the courts has been completely different. In the United States, those responsible were fined and criminally convicted. In Spain, the Supreme Court, despite what is indicated by the CJUE, twists the law to save the banks from returning 70,000 million euros to those affected.