new mortgage law - European court of Justice

A recent ruling by the European Court of Justice (ECJ) allows for the possibility of clients to sue banks for abusive clauses in mortgage loans even if the clients waived their right to claim.

Although the judgement puts the onus on Spanish courts to make the final decision, at Costaluz Lawyers, we believe this is excellent news for consumers.

ECJ Ruling

On 9 July 2020, the ECJ published its sentence on agreements between banks and consumers regarding floor clauses (cláusula suelo in Spanish) that include waivers of legal actions. The ECJ has ruled that these agreements must be subject to transparency controls by a judge at a Spanish court.

In other words, it is up to a Spanish judge to decide whether the consumer had enough information to make the decision to agree to waive legal action.

If the judge rules that the transparency control was not met, the consumer will have the chance to claim back excess interest paid to the bank.

Abusive clause waivers

As followers of the Costaluz Lawyers blog well know, we have been fighting successfully for mortgage holder rights for years and follow ECJ rulings closely. The latest has to do with floor clauses included in mortgage contracts where the client agrees to waive claims against the bank.

The floor clause included in many mortgages puts a limit on the minimum interest rate paid and has in the past stopped mortgage holders from benefitting from lower rates. We have successfully won court cases against banks and our clients received compensation for the excessive interest rate they paid.

However, many mortgage holders have not claimed against their banks and have signed waivers expressly stating that they will not claim for a refund for excess interest paid.

The latest ECJ sentence is of particular interest to them.

Find out more about mortgage claims in Spain

The Small Print

The ECJ has ruled that mortgage contracts including waiver agreement must be subject to transparency control by Spanish judges. Furthermore, the ECJ has sentenced that the waiver agreement is only valid if the judge deems it to have passed the transparency control.

To pass a transparency control, the consumer’s consent must have been free and informed at the time of signing the waiver. This means that the consumer must have been aware of the economic consequences on taking the decision to agree to waiver the right to claim.

The Court ruled that the standard phrase included in mortgage contracts, “the signatory understands the mechanism of the Floor Clause” is not enough. And does not meet the requirements of the transparency control.

Read our stories about successful claims against Spanish banks

Door Open to Claims

The ECJ ruling puts the ball firmly in the court of Spanish courts where judges will have to decide on the degree of transparency. And more importantly, assess whether the client had sufficient information to understand what he was actually giving up.

While we cannot comment on individual cases here, we believe this ruling opens the doors for more claims against Spanish banks for floor clauses even when waivers are involved.

We consider that many mortgage holders were not fully aware of the financial implications of giving up your right to claim a refund for excessive interest.

Furthermore, the ECJ questions the idea of a consumer actively agreeing to renounce future legal action. Directive 93/13 expressly confers legal protection and rights to consumers, and a waiver would be contrary to the norm and place the consumer protection system at risk.

Your next step

If you have signed an agreement for a floor clause that waives your claim rights, get in touch with our team.

We offer a free consultation to look at the particulars of your case and find out whether you are entitled to a refund for excessive interest paid.

María Luisa de Castro

DIRECTOR

María founded CostaLuz Lawyers in 2006 and is the Firm’s Director. María is registered Lawyer number 2745 of the Cadiz Bar Association and is licensed to practice in all areas of law throughout Spain. Working closely with her team, María has developed the firm into one of the most highly regarded and trusted Spanish Law Firms acting for English speaking clients with legal problems in Spain.

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