Spanish Mortgage Loans: refund of the overpaid interests in the cases of mortgage floor rates clauses, despite the Court Order from the Highest Court of Spain.
Dear Readers ,
As informed previously, recently there was a Court Order published from the High Court of Spain (Tribunal Supremo TS), in relation to mortgage floor rates, number 1916/2013.
Mortgage Floor or Minimum Interest Clause, is a clause included in most mortgage loan agreements, setting a minimum rate of interest. These clauses limit any possible fall in the level of interest rates, normally the Euribor.
TS states that the mortgage floor clauses affect the principal object of the loan (price, interest) and in practice make the interest of the loan a fixed one, affecting the final price to be paid by the consumer, and are essential and relevant, this contrasts with the unclear wording given to clients by the bank. The Spanish TS stated that theses clauses are not clear because the bank does not give enough information to the consumer about how they can affect the payments.
Therefore TS ruled against the respondents in that court case (BBVA, Caja Rural, NCG Banco) asking them to delete from their contracts these mortgage floor rates, and not to use them again in the same way, declaring them null and void.
One criticism levied against the TS in its ruling, was that it stated that this court order was non retroactive, and would not affect previous court orders or payments already made. Thus, the TS did not oblige the return of the interest overpaid, understanding that a general declaration forcing all the banks to pay back interests already overcharged, could have meant a serious problem to the economy of the country as a whole.
Fortunately, following this TS’s Court Order, several new court orders from other courts have been published, such as from the Provincial Court of Cuenca, where the Castilla La Mancha Bank was forced to remove the mortgage floor rates from the agreement and return the interests overcharged. Similar rulings can be found in court orders in Málaga, Ourense, Alicante, etc. Most of these Court Orders understand that these individual returns claimed for, by themselves and one by one, do not imply by their amounts any risk for the national economy and the banks must pay back the overcharged interests.
If you have a mortgage loan with an interest floor rate, we can assist you. Please check if this is your case.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues
Written by a CBBA member
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