Finally, the complete Spanish High Court Order concerning the mortgage floor rate clauses has been published. If you have a mortgage loan, this is of interest for you.

Posted on by Carlos Baos
Dear Readers ,

As informed previously, a mortgage or interest floor rate (clausula suelo) is a clause included in most mortgage loan agreements, setting a minimum rate of interest. These clauses limit any possible fall in the level of interest rates, normally the Euribor.

As announced some weeks ago, the complete Court Order from the High Court of Spain ( Tribunal Supremo TS), in relation to mortgage floor rates, has been published. Cited number 1916/2013, and dated on the 09/05/2013, it overviews the rules and laws and court precedents in Spain and European Union, regarding Consumer legislation rules and laws and unfair terms, etc.

From this court order of 93 pages it should be highlighted, that the Spanish TS concluded that the courts have not only the possibility but also the obligation to monitor and check for the existence of unfair terms or abusive clauses against consumers.

TS also states that the mortgage floor clauses affect the principal object of the loan ( price, interest) therefore the courts cannot determine if they are balanced or not, as the parties are free to agree what they want; but, also states that the courts could and must control if these clauses are clear for the consumer. Therefore, although the consumer has been provided with all the information before going to the notary to sign a mortgage deed, the key to determine if the floor interest clause is abusive or not and damages the consumer rights, would be if they are understandable by the consumer and if they make the consumer aware about how they can affect the price, interest to be paid, etc.

The Spanish Supreme Court Order ( TS) states that these floor interests rates in practice make the interest of the loan a fixed one, affecting the final price to be paid by the consumer, therefore theses clauses are essential, and relevant, this contrasts with the unclear wording given to them by the bank, normally lost in the middle of really long deeds ( escrituras) with other minor agreements or details.

The Spanish TS stated that theses clauses are not clear because the bank does not give enough information to the consumer about how they can affect the payments, and what would happen in different scenarios, etc.

TS ruled against the respondents (several banks like BBVA, Caja Rural, NCG Banco) asking them to delete from their contracts these mortgage floor rates, and not to use them again in the same way. The only bad news for consumers: the court order is non-retroactive, and therefore will not affect previous court orders or payments already made.

If you have a mortgage loan with an interest floor rate, we can assist you.