On Saturday 21st
January the requirements to make claims under Mortgage Floor Clauses in Spain were published in the official Bulletin of the State in Spain.
Floor Clauses are clauses in mortgage agreements whereby if the interbank interest rate (Euribor) drops below a certain rate then the Floor Clause kicks in and the interest rate that the consumer pays does not fall any further. Effectively a Floor Clause is a minimum interest rate that applies even if Euribor drops to a level whereby the interest rate that should apply to the mortgage would have been lower.
A decision in the Supreme Court in Spain ruled in 2013 that these Floor Clauses were abusive and ruled that they could not apply in future (i.e. the decision was not retrospective and only stopped Floor Clauses applying from the date of that judgement.
This Spanish judgement was then taken to the European Court of Justice and that court ruled in December 2016 that the original judgement could apply retrospectively – that is to say that floor clauses have always been abusive and unenforceable and that consumers can apply to recover any amount of interest that they have paid over and above the amount that they would have had if the floor clause had not been applied.
January 2017 the methodology for the repayment of these over payments of Floor Clauses was published. This publication set out the requirements for making a claim under an abusive Floor Clause. It specifies that a claim can be made if there was a floor clause in a mortgage loan taken out by a consumer. This means that this does not apply to commercial mortgages and only applies to consumers.
The decision then goes on to define what a consumer is and also what a Floor Clause is. A consumer is that as defined by Article 3 of the Ley General para la defensa de Consumidores (General law for the defence of consumers), which in turn says that a consumer is somebody who a physical person who acts in their own personal name (i.e. they are not a company and they are not an individual acting on behalf of their business).
A floor clause is defined as a stipulation included in a loan or credit agreement which is guaranteed by way of a mortgage with a variable interest which limits the lower level of the variable interest in the contract.
The law on the claims for floor clauses sets out the steps required to make a claim under the floor clause abuse system;
- The banks must have a system to reclaim the interest due in order to avoid cases going to court and they must bring the existence of such a system to the attention of those consumers who have floor clauses.
- Once a claim is made the credit entity must calculate the amount that should be returned and send this calculation to the consumer. If there is no interest due then the bank must explain to the consumer why this is.
- The consumer must confirm whether they are in agreement with the calculation that was sent to them. If they are then the bank will confirm that they will return the amount to them.
- There is a three month maximum time in which the bank and the consumer have to agree the return and for the money to be returned is three months from the date in which the claim is made. If this time period expires it is understood the out of court period has expired and that this is because;
- The bank has rejected the request of the consumer
- The three months has expired without communication from the bank to the consumer
- That the consumer does not agree with the calculation made by the bank
- The three months has expired without the amount being paid to the consumer
- The bank will inform the client that the return of the money may have tax consequences
- The two parties cannot start court proceedings in relation to a Floor Clause claim whilst this three month period is still active.
- There should be no charge for the out of court negotiation and settlement of the floor clause repayment
If a settlement cannot be obtained than the parties have the right to go to court. If a consumer rejects an offer made by the bank and then goes to court then they will only get their costs back if the amount that is finally awarded by the court is higher than the amount that was offered by the bank.
The banks are now obliged to have a system to deal with claims for Floor Clauses and must set up a department to deal with these and to resolve any claims within three months of the claim being presented.
Once the settlement for the overpayment of interest has been done then the parties can then agree an amount for compensation. The bank should agree this within 15 days. The consumer should be given the correct information in order for him to decide whether to accept the compensation amount.
This, combined with the court judgements of 2013 and December 2016 mean that if you have been affected by a floor clause applying to your Spanish mortgage you should be contacted by your bank to agree a settlement with you to return the over payment of interest that was made as a result of the floor clause being applied.
If you would like to know more about Floor Clauses in Spain or have any other problems with Spanish mortgages or need legal representation in relation to either one then you can contact our legal team
Disclaimer – International legal issues are a complex area of law and this information is no substitute for independent legal advice on an individual basis taking into consideration your personal circumstances and legal requirements. This information is provided to provide general information only and was correct at the time of publishing. The legal position in relation to international transactions can change frequently and this page may not have been updated following any changes in the law. You should therefore not rely on this information and should seek legal advice in relation to your personal circumstances.