Consumer and Banking Law in Spain: The Spanish mortgage floor rate clauses. Are the mortgage loan interest floor rate clauses legal?. Answer from the Spanish courts, lawyer etc.


Dear Carlos

When I took out my mortgage I was not advised that there was a mortgage floor rate ( clausula suelo), I was only told it was variable and linked to the euribor.

For the last few years I have been paying 4.25% interest even though it is linked to the euribor rate. I have had numerous conversations with my Bank Caja Granad, who say until the judge rules that the rate needs to fall, they will continue to charge interest at 4.25%.

Do you know if there is any way I can challenge this?

Dear Reader,

Thanks for your consultation

As you say, the mortgage or interest floor rate (clausula suelo) is a clause included by the banks in some loan agreements secured by mortgage, that sets a minimum rate of interest. These clauses limit the possible fall of interests, that in Spain are normally linked to the Euribor, as you said.

Due to the very low Euribor rate, many banks are using these clauses at present to keep the interests higher, as in your case. The banks normally indicate that these interest floor rates (clausulas suelo) are regulated by the Bank of Spain and they meet with the Spanish bank regulations.

It looks that these mortgage – interests floor rates have been imposed by almost all banks, from the more important i.e: BBVA, SANTANDER, CAM, SOLBANK, BANKINTER, LLOYDS, BARCLAYS, to the small ones.

The court order number 00489/2012 of the Mallorca Provincial Audience has been granted and published few days ago. This order is very interesting and declared null and void an interest floor rate imposed by the CAIXA RURAL DE BALEARS .

In relation to this judgement and many others, we can point out:

1.- Although there are a contractual bank regulations which permit the interest floor rates, these agreements are also subject to the Consumers and Users rules. Therefore , although it cannot be said in general terms, that the interest floor rates are illegal and abusive, each case much be studied individually, to check if meets the requirements as regards clarity, information, etc, foreseen for Consumers and Users.

2.- The limitation to the interest reductions must be informed and negotiated with the client-consumer with total clearness and prior to signing the final agreement. The consumer must be given the right to decide and compare with other offers, in order to decide in a free manner, etc. This limitation on the fall of interests must be part of the binding offer ( oferta vinculante) which the banks must hand over to the clients before signing.

3.- A determining factor to decide if a floor rate clause is abusive or not, could be if on the same loan agreement there is a top rate clause (clausula techo). In this case, it needs to be checked if the top rate clause and the floor rate clause are proportionate or not.

Although it is true that some judgements and court orders have been granted declaring the invalidity of these interest floor rates and asking the banks to refund the interests charged, it is also true that there are other judgements refusing other claims against these same type of clauses. Therefore each case has to be studied individually and in detail, before determining the possibilities of success.

If you or someone you know is going through a similar situation then please do not hesitate to contact us, we will be more than pleased to assist you.

The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.

White & Baos
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