Spanish Supreme Court declares mortgage “floor clauses” void
The Spanish Supreme Court has ruled that floor clauses can be deemed void where the bank failed to advise customers with clarity and transparency, establishing conversely that would be licit where borrowers were fully and adequately informed.
The high court analysed the clauses used by the bank BBVA and found them to be in breach of consumer regulations due to the following reasons:
- There is insufficient clear information that such clauses are material to the object of the contract.
- They were inserted together with “ceiling clauses”, which caps the loan interest rate, as if offered in exchange for the bank’s concession.
- The bank failed to offer examples on specific instances of interest rate behaviour.
- There is a lack of clear and comprehensible information in respect of cost comparisons with other loans offered by the lender -where there are others- or a warning that the borrower is not being offered others.
- In the case of BBVA, the clause is embedded within significant data that disguises it and has the effect of diluting the attention of the consumer.
The Supreme Court has also found these clauses to have a perverse effect: they created the false appearance that the lower the Euribor, the lower the mortgage repayment (it was thus just an amiable facade).
Customers in the above scenario are now in a position to succesfully challenge such clauses although, as was made clear by the Supreme Court, the ruling does not have a retrospective effect.
Do you have one of such clauses in your mortgage loan contract? Have you calculated how much you could save by having it removed?
Thank you for this informative post. How does this ruling affect other banks right to keep the floor clause? In our case we have a floor on our Sabadell Atlantico mortgage and have been telling them for 3 years that it cannot surely continue when the government is trying to stimulate the economy with lower interest rates. Does the law of precedence work in Spain? Also, it seems to depend how this floor clause was communicated. It is in the “small print” of our mortgage and we were never made aware of it verbally. We became aware of it when the Euribor went down very low and our mortgage didn’t!