Mortgage holders received more good news from the Spanish Supreme Court this month in the form of two sentences. One confirmed that consumers are not tied to a waiver of any court action against banks. The other recognised that stipulations modifying original floor clauses in mortgage contracts are only valid if they benefit the consumer.
Supreme Court Upholds EU Decision
The recent rulings come in response to an appeal by a Spanish bank. Supreme Court judges based their decision on a confirmation of the sentence pronounced in 2018. Under this ruling, a potentially null clause can be modified. This confirms the decision made the European Court of Justice earlier this year in July.
Transparency Obligations
The latest sentence is tied intrinsically to the compulsory rules of transparency that banks must adhere to in contracts, including mortgages. The Supreme Court points out that the same transparency must apply to both the conditions for waiving future claims and for the floor clause.
Do you have a problem with your Spanish mortgage? Find out how we can help you claim against your bank.
Transparency for a waiver
According to the Supreme Court, the validity of a waiver must pass the same transparency test as all consumer rights. The entity – in this case, the bank – must ensure that the consumer has all the relevant information to make an informed decision on the legal consequences of signing a waiver.
Transparency for floor clauses
The same informed decision criteria applies to the new floor clauses in mortgage contracts. The Supreme Court has ruled that the borrower must be fully aware of the economic consequences of modification (reducing the floor rate). In particular, the borrower must receive examples of past indices on which interest rates were calculated.
In addition, the judges stated that a handwritten note from the client stating that he was aware of the downward limitation of the interest rate does not indicate negotiation between the client and the bank. It does, however, show some transparency in conjunction with other elements.
These include:
- Proof that the client knew how much monthly payments were before the new clause.
- Proof that the client is aware of index values.
- Proof that the client has knowledge of official interest rate indices issued by the Bank of Spain.
Open door for future claims
Consumers who took their disputes over floor clauses in mortgages to Spanish banks often found that the bank was prepared to eliminate the clause in exchange for the commitment from the consumer not to make future claims. As a result of this waiver, many consumers could not claim compensation from banks for the excess paid due to the floor clause.
The latest ruling from the Supreme Court declares that the consumer is not tied to the waiver in future disputes over actions based on recognised consumer rights. This opens the door to mortgage holders who wish to claim for excess interest paid because of floor clauses.
Costaluz Lawyers welcomes this latest sentence as it confirms the basic consumer right to claim for compensation against an entity. In this case, Spanish banks made many clients sign a waiver, thereby renouncing their rights as a consumer.
Did you sign a waiver?
If you signed a waiver renouncing future court action against your bank over a floor clause in your mortgage, get in touch. Our expert legal team has successfully won compensation for dozens of clients affected by abusive clauses in mortgage clauses. We would be only too happy to help you.
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