Mortgage ilegal clauses

A floor clause (or “cláusula suelo” in Spanish), refers to a specific condition generally included in financial contracts and in particular mortgage loans.   In the case of variable interest mortgages, this floor clause caps the minimum interest possible at a set rate e.g. 4.5% plus the stated differential. Thus should the applied rate of interest, e.g. EURIBOR drop below the floor clause the latter will still be applied to the owners loss.

In the last ten or fifteen years, many banks in Spain included within their mortgage contracts with individuals, a clause limiting the minimum interest rate to a percentage ranging between 3.5% and 7%. This is the floor clause.

In a time when interest rates like the Euribor are at a historical low (0,54% as of Sept 2013), a floor clause that keeps the interest rate fixed at 3%, 4% or 4.5% may result in much higher monthly repayments e.g. for an average mortgage of 150.000€ at 20 years and subject to Euribor + 1 the inclusion of a floor clause could result in an additional 250€ per month. If a mortgage has been in force for a few years, lets say a mortgage signed with a floor clause of 4% before the historical drop of EURIBOR that took place in the 4th quarter of 2008, by now the client may have already paid an accumulated excess of 10,000€ or more.

Many people have judicially demanded the annulment of such floor clause, being as it is a general clause contrary to the Consumer Protection Law.

The Supreme Court issued a historical Judgement (May 9th 2013) ruling as illegal all floor clauses entered in the mortgage contracts from BBVA and two other Spanish banks. The conclusions of this document serve as a handbook on the use of floor clauses in fair contracting:

The Courts must protect the weaker party in an agreement, usually the consumer/ borrower against the supplier/ lender.A clause is abusive when a) it limits only the rights of the consumer and b) it has not been negotiated and discussed individually between the parties.

The professionals (the banks) must prove that they offered to discuss the essential clauses individually, and has offered the consumer (the borrower) alternatives.

We consider that it is possible to claim back from the Banks the amounts which borrowers have paid in excess due to the application of a floor clause included in their mortgage contract. A majority of the most recent Judgements issued by the Lower and Middle Courts have applied this principle.

So if you have a floor clause in your mortgage contract, we can help you to claim back against the bank. Getting your money back is indeed possible.

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