Within hours of the European Court of Justice (ECJ) ruling that abusive floor clauses could be reclaimed without any time limit, Spanish judges started implementing the decision.
On the same morning that the ECJ decision was announced on the 21st of December two courts, one in Barcelona and another in Oviedo, ruled that borrowers were entitled to refunds for mortgage interest overcharging due to abusive floor clauses with total retroactivity, going back beyond May 2013.
A judge in Barcelona ruled that a client of Banco Popular had not been adequately informed of “the existence and implications of a floor clause” based on the pre-contractual documentation and simulations provided, and that the floor clause did not meet the “transparency requirements” stipulated by the Supreme Court.
In both Barcelona and Oviedo the judges found the floor clauses to be null and void for lack of transparency, entitling the borrowers to a full refund on mortgage interest overpayments going back over the lifetime of the loans, with no time-limit.
The ECJ ruling has big implications for Spanish lenders, some of whom will now have to return hundreds of millions of Euro in overcharged interest (the total amount overcharged is estimated to be €4 billion).
The Spanish Government recently tried to introduce a ‘Code of Good Conduct’ to reduce the time and cost of getting refunds, but it ran into political and banking opposition, so it abandoned that plan and now proposes a ‘Protocol for Action for Floor Clauses’ (rotocolo de actuación para las cláusulas suelo) based on mediation by an independent committee and non-binding judgements that will be totally ineffective. That means, for now at least, the only way to get a refund will be in court.
HOW DO YOU RECLAIM?
Floor clauses are not illegal in themselves. The problem was that, in many cases, they were not adequately explained, and that clauses in contracts were not “transparent” or “understandable”. This means you are not entitled to automatic reimbursement just because you have a floor clauses in your mortgage agreement. You have to go to court to argue the clause was not adequately explained to get it ruled null and void. Then you can reclaim overpaid interest. That means you need a lawyer to take your case to court. See our service directory for lawyers in Spain.