Legal tip 1431. Floor Clauses – Supreme Court confirms refund of ALL overpaid interest
Tuesday, February 21, 2017 @ 12:26 PM
Following the Sentence issued by the European Court of Justice in December 2016 regarding the retroactive effect of nullity of abusive Floor clauses (Cláusula Suelo), Spain’s Supreme Court has now ordered Spanish banks to refund their clients all the money they over-paid due to the Floor Clauses. The Supreme Court Sentence was issued on 15 February 2017. The full text of the Supreme Court Sentence has not yet been published, just an abstract of the decision is known at present.
What is a floor clause?
These clauses set a minimum interest rate that borrowers would have to repay, even if the reference index (Euribor) dropped below the minimum interest rate, as happened from 2009 onwards. Therefore mortgage holders with this clause in their loan were unable to benefit from the fall in the Euribor.
It is not specifically the Floor Clause that is illegal but the way it was included in mortgage contracts without its effect being fully explained to the customer. This lack of transparency and lack of information is the reason this clause is deemed abusive.
What does this New Court Supreme Court ruling add?
With this February 2017 Court sentence, Supreme Court Case Law is now clear on the refunds that are due if a Floor clause is considered abusive due to a lack of transparency. Refunds must be paid from day one of the client being overcharged, instead of only from May 2013 as was decided by our Supreme Court back in 2015. Legal interest will also be applied to all refunded amounts.
How should I Claim?
A refund procedure is being prepared by the Government. Once the bank has received the claim from the client, it will have three months to present an offer of settlement. If an agreement is not reached in this time, a judicial action (Lawsuit) will be necessary. Special Courts are also being created for these cases.
As an additional note: if you are currently negotiating giving the property back to the bank (Dation) or are in the process of a repossession procedure, the existence of a floor clause can help the efforts to succeed.
Zahara de la Sierra, Cádiz, South western Spain