The Spanish Supreme Court has ruled in favour of OCU (Consumer Organization) by manifesting that Banco Popular’s floor clause to be null and void. This is another battle OCU has won against one of Spain’s leading banks following up from sentences in 2013 that ruled against BBVA, Abanca and Cajamar.
If you have been following this particular issue that is rampant in Spanish banks, you would know that during the property boom, limits were placed within clauses of mortgage loans to stipulate a minimum interest rate throughout the life of the mortgage. This means that if the interest rate were to fall below the stipulated minimum or floor clause, the holder would not benefit because the bank would charge the “agreed” floor clause. I say “agreed” simply because most holders were not properly advised of the existence or the meaning of this clause in their contracts.
The wording of the clause was usually confusing or carefully concealed so that it would not be apparent, resulting in a lack of transparency that is not permitted. It is also the bank’s obligation to fully disclose all clauses within the agreement. Now if you’ve never seen a mortgage deed before, I can tell you it is a thick document full of complicated equations that even bank managers and bank employees do not comprehend, let alone Mr and Mrs Regular Joe. During the explanation, large portions of the agreement are left out and only the interest rate payable during the first 6 months, the monthly repayment amount and the duration of the loan are normally spoken about.
Since the first cases were won, those banks that still include the floor clause in their agreements have become very vocal about its existence, actually making a point of disclosing it in full and on numerous occasions so as to avoid legal issues further down the line. Not only that but notary’s require the mortgage applicant to sign a document to state they are aware of the floor clause.
If your mortgage agreement includes the floor clause, you may well be able to recoup any monies overpaid over the years as well as having the clause removed from your contract. Contact a lawyer to review your particular case and discuss your options.