Spanish Floor Clauses: A Guide to Mis-Selling and Claims

In 2019, the Spanish government banned floor clauses, also known as "cláusulas suelo", due to widespread mis-selling.

These clauses were often hidden in mortgage contracts and capped the interest rate at an unreasonably low level.

Homeowners were then charged a higher rate, often resulting in significant overpayments.

The ban aimed to prevent this unfair practice and protect consumers.

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A Spanish Floor Clause, also known as Cláusula Suelo, is a clause that was often included in Spanish mortgage contracts to protect lenders.

It establishes a minimum interest rate that borrowers must pay, even if the interbank interest rate (euribor) drops below that rate, meaning you'd still pay the higher rate.

In 2013, the Spanish Supreme Court ruled that these clauses were abusive and couldn't be used from the date of the judgment.

The European Court of Justice also deemed them unfair, paving the way for borrowers to claim compensation.

Many Spanish banks slipped this clause into mortgage contracts without telling clients, leading to a mis-selling scandal similar to the UK's PPI scandal.

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Floor Clauses are statements that have been put into Spanish mortgage contracts as lender protection to ensure that the interest rate paid by the customer does not fall below a certain rate.

This means that if your mortgage contract includes a floor clause, there will be a minimum set interest rate that applies to your mortgage repayments, even if the interbank interest rate (euribor) drops below that rate.

In 2013, the Spanish supreme court ruled that these floor clauses were abusive and could not apply in future.

The ruling meant that floor clauses could not be used from the date of the judgement.

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A Clause is a term used in Spanish mortgages that can affect your payments.

It's often hidden in legal language, making it hard to spot.

The Floor Clause, or "Cláusula Suelo", is a type of Clause that's been deemed illegal by Spanish and European Courts.

It forces borrowers to pay above a set interest rate, even if the official EURIBOR indicator goes below that threshold.

This Clause is established to set a "floor" for interest payments, so even if your actual interest value decreases, you're still liable to pay the quantity established by the Clause.

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The Spanish government has taken a strong stance against the mis-selling of mortgages with floor clauses. In 2010, the Supreme Court deemed the floor clause imposed by banks in recruitment mortgages as "abusive", "incommensurate", or "unclear".

Banks have been held accountable for their actions, with the Supreme Court ruling that the overpaid amounts by consumers will be refundable. This has led to a wave of judgments in favor of consumers at mercantile courts and provincial high courts.

In May 2013, a major turning point was reached when the Supreme Court declared the floor clause illegal in 400,000 contracts from BBVA, 90,000 from Novagalicia Bank, and 100,000 from Cajamar. The key reason for this was the lack of sufficient clarity and transparency in the clause.

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The floor clause mis-selling issue is quite widespread in Spain, with around four million mortgage contracts containing these clauses.

Borrowers who took out their Spanish mortgage between 2007 and 2009 are most likely to have floor clauses, which could lead to significant compensation.

The average person entitled to compensation is likely to receive around €15,000, although it could be much more in some cases.

This issue has the potential to affect a large number of people, with banks possibly being forced to provide compensation to the tune of €4 billion.

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Government rules on mis-selling have been put in place to protect consumers. In Spain, the Supreme Court has deemed the floor clause in recruitment mortgages "abusive", "incommensurate", and "unclear".

The floor clause has been a major issue, with banks imposing it on thousands of customers. The Supreme Court dismantled the clause in 2010 following a complaint from the OCU.

May 2013 marked a significant turning point, with the Supreme Court pleading the floor clause illegal in 400,000 contracts from BBVA, 90,000 from Novagalicia Bank, and 100,000 from Cajamar. The key reason for this was the lack of sufficient clarity and transparency.

In October 2015, the European Commission requested that the amounts overpaid due to the floor clause be given back to the clients. This move highlights the importance of government rules in protecting consumers from mis-selling practices.

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If you have a mortgage with a Spanish bank, you need to be aware of the banks that used floor clauses in their contracts. Banco Popular, Sabadell, Caixabank, BBVA, Liberbank, Santander, Bankia, Ibercaja, Caja Espana, Caja Sur, and Cajamar are some of the more prevalent ones.

If you're a UK expatriate living in Spain, it's a good idea to engage with a Spanish legal firm to arrange your claim, especially if you have a good grasp of Spanish. Alternatively, you can have your claim arranged through a UK firm partnered with a Spanish legal firm.

International expatriates living in Spain may also find it easier to have their claim arranged through a UK firm partnered with a Spanish legal firm, especially if they have a good command of English.

UK residents owning Spanish property may find it easier to have their claim arranged through a UK firm partnered with a Spanish legal firm, especially if they have only a limited understanding of Spanish.

If you live outside Spain and don't speak Spanish, you may find it difficult to communicate your claim effectively through the Spanish system. Having your claim arranged through a UK firm partnered with a Spanish legal firm can be a good option, as everything will be handled in English.

Here are some Spanish banks that used floor clauses:

To make a floor clause claim, the banks must have a system in place to reclaim any interest due and inform customers with floor clauses in their mortgage contracts. This system is crucial to avoid cases going to court.

The bank must calculate the amount that should be returned and send this calculation to the customer. If no interest is due, the bank must explain why this is the case.

The customer must confirm whether they agree with the calculation, and if so, the bank will confirm that they will return the amount. The entire process must be completed within a three-month time frame, starting from the date the claim was made.

Here are the possible reasons why the three-month period may expire:

It's worth noting that there should be no charge for the out of court negotiation and settlement of the floor clause repayment.

The bank negotiation process can be a complex and time-consuming task, but it's essential to understand how it works to make a successful claim.

First, the banks must have a system in place to reclaim any interest due on a floor clause, and they must bring this to the attention of customers with affected mortgage contracts.

The negotiation process involves several steps, including the bank calculating the amount of interest due and sending this to the customer. The customer then confirms whether they agree with the calculation, and if they do, the bank will return the amount.

If the customer and bank cannot agree on the calculation, the three-month period for out-of-court negotiation expires. This can happen if the bank rejects the customer's request, or if there's no communication from the bank to the customer within the three-month timeframe.

It's worth noting that there should be no charge for the out-of-court negotiation and settlement of the floor clause repayment.

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You'll need a lawyer to help you navigate the complex Spanish legal system, which differs significantly from the UK's system.

In Spain, cases of this type typically only involve a single court process.

A lawyer is essential when dealing with banks and other institutions, as they're familiar with the specific timings, formalities, and paperwork required by authorities in the country.

Our team of expert lawyers has extensive experience dealing with abusive mortgage terms and can attest to a high degree of success in such cases.