Abusive bank practices in Spain

  • Abusive Spanish bank practices: know your rights

    The rumours are true: Spanish banks are paying compensation to customers with mortgages.

    If you are a Spanish property owner you have probably heard about so-called “cláusulas suelo” (interest rate floor clauses) written into mortgage contracts with many Spanish banks, mainly between the years 2000 and 2009. These clauses refer to a cap on the amount of interest paid on the loan and have been considered abusive by the Spanish Supreme Court because they kept loan repayments artificially  high when the Euribor interest rate was much lower.

    What happened?

    The Spanish financial system has been reprimanded by the European Commission for including floor clauses in mortgage contracts without fully informing clients of the implications of these clauses. Customers are being urged to push their banks for compensation for abusive interest rates. If the client doesn’t ask, the bank won’t give.

    Since the landmark Supreme Court rulings dated 23rd March 2015 and 23rd December 2015, the Spanish legal system has made it easier to make a claim for compensation by allowing these cases to be heard at the less-saturated local First Instance Courts rather than the overworked regional mercantile courts. It is hoped that each individual case will be settled within a year of being filed.

    Unfortunately, if you have already filed a case before your regional mercantile court you cannot ask for it to be transferred to the local First Instance Court.

    Are you affected?

    If you took out a mortgage with a Spanish bank in the years 2000 to 2009 it is possible that your mortgage agreement includes abusive interest rate floor clauses. The Spanish mortgage lender was obliged to make specific and concrete reference to these clauses in the binding offer, in compliance with transparency regulations. If you believe you were not informed and wish to file a case for compensation, the bank will need to provide evidence that you were fully informed of the interest rate floor clauses. In many cases consumers are receiving reimbursement of monies paid in excess during the time the clauses were in place as well as having the clauses removed from the existing mortgage agreement.

    What should you do?

    The law firm I work for is offering free consultations in English. Please fill in this form for more information.

    What are you waiting for?

    An estimated 2 million mortgage contracts are plagued with illegal floor clauses. Maybe one of them is yours.

     **NEWSFLASH** breakthrough April 2016 decision

     A significant judicial breakthrough was announced on 7th April 2016 regarding abusive bank practices. The Court of First Instance nº 11 of Madrid (judicial proceeding nº 471/2010)  passed a judgment whereby 40 Spanish financial entities are held responsible for lack of transparency in imposing interest rate floor clauses to consumers in mortgage contracts. It was a long awaited decision considering that the claimant - the consumers association ADICAE - filed this class action in 2010. Now is the time for individual consumers to sue their banks in case they refuse to remove these abusive clauses in their mortgages and give back the monies received in abusive interests since the 9th of May 2013 when the Supreme Court declared these clauses null and void but only with respect to the three respondent banks parties to that lawsuit. From now on, the whole financial system is considered liable under this new and long awaited ruling (please note, however, that the banks can still appeal this decision). Contact me for more information.