Spain’s Supreme Court has ordered the country’s banks to refund their customers all the money they earned from applying so-called floor clauses (cláusulas suelo).
Floor clauses imposed a lower limit on monthly mortgage repayments no matter how much the interest rate on the loan fell, and were often hidden deep within contracts and addressed only in small print. This practice was found to be abusive according to a ruling by the European Court of Justice (ECJ), which ordered lenders to hand back to their clients all the money they made on unfair mortgage floor clauses. Some 2.5 million mortgage holders in Spain are thought to be affected.
Until now, following a Supreme Court ruling issued in 2013, Spain’s banks were only required to annul floor clauses from May 2013. By the new ruling they will now have to pay back earnings dating back to 2009, when they first introduced the clauses, an amount estimated at between €3 billion and €5 billion.
As well as refunding the overcharged money due to the floor clause, the banks will also have to pay out interest on the capital. Banks will have three months to present an offer after having received a claim from a client.
Compensation will be offered in cash as the first option, however, banks can offer other products or mortgage conditions, should the client give their consent. The mortgage holder will have 15 days to give the bank an answer, during which time they will be able to check whether the offer is adequate via advice from lawyers or consumer organizations.
The key issue for winning a case is that of transparency. Floor clauses are not illegal, however if they were hidden in the contract and the customer did not know about them then there is a case for winning. However, if the bank can prove that there was no lack of transparency and the client was duly informed of the presence and consequences of these clauses, the case can be nulled.
If you are affected by the floor clauses and seek legal advice don’t hesitate to contact us at firstname.lastname@example.org or call us at +34 932 553 107.