GOOD NEWS: SPANISH BANKS ARE LOSING THE BATTLE AGAINST EU CONSUMERS IN SPAIN.
Dear readers, clients and friends,
For those of you who might have a mortgage in Spain at the moment, this article will surely be of great interest to you, even if you might be national from another country, as you have the same rights as a Spanish consumer!We’ve been recently receiving a lot of enquiries from people affected with all kind of problems with Spanish banks.Sometimes the clients are paying a disproportionate interest rate, as the bank is still applying the already extinct IRPH-“Cajas”.
In some other instances, the mortgage contract contains several abusive clauses, like for example, the so-called “floor-ceiling clause”. As a result of the landmark EU as well as recent domestic Spanish Court decisions, I would like- if I may- to briefly clarify some of the most frequent questions and doubts posed by our clients regarding this important matter:
Question 1º) “What does a “floor-ceiling clause mean” (cláusula suelo in Spanish)? Why does this clause is considered to be abusive?”
First of all, the Spanish Supreme Court has recently ruled that the “Interest rate floor clause” can be declared abusive if the client/consumer was not duly informed before the signature of the mortgage contract at the Notary, about its content and implications, in a clear, transparent and comprehensive way.
Last September 2013, the Supreme Court clarified a judgment delivered in May 2013 declaring floor clauses null and void if they breach the levels of transparency demanded by the European Consumer Directive. The clarification stated that within the context of a mortgage contract, the infringement of the indicated criteria was sufficient grounds for these clauses to be completely nullified.This specific floor rate clause imposes a limit on the extent to which consumers can benefit from lower borrowing costs, should the reference index used to set mortgage rates fall — in Spain the one-year Euribor interbank rate is usually used. (for instance 3,25%).In simple terms, it defines the lowest percentage of interest to be applied to the payments the borrower is to pay.In Spain that percentage is most usually measured according to the Euribor, (European borrowing rate). The problem is that if the floor clause is too high and the Euribor rate is below it, no matter how low the Euribor might be, the mortgage payments will never go down below the threshold of the floor clauseOn the other hand, the “ceiling rate clause” (or “cláusula techo” in Spanish), marks a limit to the maximum percentage of interests to be applied to the liquidation of the mortgage. This clause can be also abusive because if it is too high, then it will not serve its purpose, which is to maintain an average monthly instalment through out the duration of the whole mortgage contract.Subsequently, in practice, the bank always wins, either:
a) if the interest rate goes too high, as the client will end up making sky-high payments,
b) or alternatively, if the Euribor goes down, (like the situation at present) the mortgage monthly payments will still be high due to the abusive floor rate clause, below which the applicable percentage will never go.The real problem with this unfair clause is that many unreliable banks mentioned it (together with the “ceiling rate clause”) but in small print, without informing clearly to their clients even about their existence.
Question 2º) “How to find out if my mortgage contains an abusive clause (floor clause or similar)?”
You will need to ask your bank for a copy of the MORTGAGE CONTRACT (MORTGAGE DEED) signed before the Notary. If the bank might refuse to give a copy to you, remember that you can actually get a certified copy or a “copia simple” directly from the Notary where you signed the Title Deed for acquisition of the house.Once that you have obtained the copy, please forward it to us together with the most recent bank statement receipts, and we will be able to confirm to you:A. Whether your Mortgage contract (“Hipoteca” in Spanish), is a “clean” one (not affected by any abusive clauses). Some banks are reliable and they actually don’t include abusive clauses in their mortgage Deeds, orB. Whether your mortgage might be affected by one or more abusive clauses, (usually a mortgage contract contains several null and void clauses that go hand in hand with the floor clause). Should this be the case, we would inform you accurately about the financial impact of that clause in your mortgage (past and future monthly payments), as well as the most advisable course or plan of action.
Question 3º) “If I have a “floor rate clause” in my mortgage contract- what can I do about it. Can the extra interests unduly charged by the bank be claimed back? Is it really worth going to Court?”
ABSOLUTELY YES. Getting your money back is indeed possible, and we have managed to reach several “out of court settlement” with some Spanish banks. However, if at the worst scenario, your the bank might refuse to reach a “friendly agreement,” it will be then necessary to sue the bank in court.In fact, we have already won a few Court cases against banks and we are currently preparing new lawsuits on behalf of an increasing number of English people affected and we are extremely confident about their outcome.In a nutshell, the objective of the lawsuit would be twofold:
A) The removal of ALL the abusive clauses
B) The removal of the FLOOR CLAUSE with RETROACTIVE EFFECT, which means that all the past interest rates overcharged would be reimbursed to the client.
Question 4º) “I have just found out that my bank is applying instead of the Euribor, an interest rate called “Caja”, which disappeared a few years ago. Can I request my bank to change my interest rate into the Euribor? What about the interest already paid in excess in the past, can I claim that money back?”
ABSOLUTELY. A significant number of Spaniards and European consumers are paying a fortune in interest, because they were never informed about the possibility to choose the EURIBOR RATE in the first place, which proved to be much more beneficial to the borrowers in the long run.
Question 5º) “What if the bank might accept to remove the clause or to change the interest rate in order to avoid litigation, should I accept straight away?”
Watch out, because the Bank might still try to misrepresent you by using all kind of dubious tricks, aimed to charge you expensive hidden costs, despite the “apparent” removal of the abusive clauses.For instance, we have detected that some Banks have recently provided clear instructions to their staff aimed to convince those clients who claim the removal of the mentioned clause, to change the original mortgage interest conditions, into a highly disadvantageous fixed rate type (see next question), or alternatively by maintaining the same variable interest type, but with a higher differential rate or even with other hidden defective mortgage modifications.On the other hand, some banks will also try using unethical blackmail tactics. For example, they will readily accept the removal of the abusive clause, but in exchange, they will blackmail you to hire some additional financial products, like house, life Insurance, or very risky financial products, etc.Likewise, another commonly used trick consists of offering the client, the accumulation of all the debts in one new mortgage loan, also called reunification of loans. Beware! Apparently, the monthly quote might seem more attractive to you, but in reality, be very careful, because you might end up paying to the Bank much more money, with higher interests and for longer period of time!!
Question 6º) “My bank has offered me a mortgage with a fixed interest rate instead of a variable one, should I accept it?”
One out of ten mortgages signed in Spain (around 11.000 between January and July this year) are of fixed interest type. In fact you can sign a 30-year mortgage for an attractive annual interest of 2,45%. However, be very careful because these kind of mortgages usually involve up to a 5% commission for early termination, whilst the standard fee involved in variable mortgages does not exceed the 0,50%. Therefore, remember to check very carefully all the terms &conditions and the small print of a mortgage contract before signing any document with your bank.
Question 7º) “I am paying at the moment very expensive mortgage, and I can hardy keep up with the monthly payments. Subsequently, If I decide to go ahead, and sue the bank, should I stop paying the mortgage?”
Not automatically. The correct procedure would be to officially request the Court to stop further payments until the Court reaches a decision in first instance. Otherwise, the bank might try counterclaiming against you by starting a repossession eviction procedure. Bear in mind that it is not the same to take the initiative and sue the bank, than waiting for the bank to sue you for default payments. The second scenario can become more risky for the client. However, we are currently dealing also with some repossession cases, and luckily, we have managed successfully to stop those unfair repossessions by invoking the existence of abusive clauses in the mortgage.Therefore, in conclusion, if you think that your mortgage might be affected by abusive null and void clauses, as a preliminary step, please do not hesitate to contact us for further advice. Never sign any new novation agreement or a brand new mortgage with the bank without consulting with a legal professional expert like our Firm. A simple consultation will save you from a lot of hazardous legal problems later on!
We hope this information is useful and should you have any additional question, please contact us by e-mail at email@example.com and we will reply back to you as matter of urgency.
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Thank you very much for your attention and permanent support and we look forward to helping you!
Mr Oscar Ricor“NON-PRACTISING ENGLISH SOLICITOR IN ENGLAND AND WALES”, under the “Solicitors Regulation Authority” (SRA) SRA number 519196 and practicing Spanish Solicitor.