The Spanish government and the main opposition Socialist Party (PSOE) have agreed on a mechanism by which the country’s banks will offer to return funds charged to mortgage holders due to so-called “floor clauses” (cláusulas suelo), which saw a lower limit imposed on monthly repayments no matter how much the interest rate on the loan fell, and which have been found to be abusive according to a ruling by the European Court of Justice (ECJ).
The PP minority government is preparing a Royal Decree – which may be approved as early as Friday – to set out the system, and, has reached an agreement on the process with the PSOE in order to enjoy the support it needs in Congress to get the measure through.
The speed of the process is aimed at preventing a matter that affects around 1.4 million banking clients in Spain from reaching the courts.
Among the measures included in the legislation is the requirement for banks to inform all clients who have floor clauses in their mortgage terms that a claims process has been opened, one that will be considered voluntary.
“Should the lender decide that the return of the funds is not applicable, the reasons upon which this decision is based will be communicated [to the client], and the extra-judicial procedure will be considered concluded,” the draft text reads. That is to say, while all banks are obliged to inform clients as to whether they have a floor clause, if the bank considers that it is not opaque (as Banco Sabadell argues), the law will not call on the lenders to return any money.
Some banks, such as BBVA, argue that many of the clients in question are financial professionals, notaries or property registrars, among others, and as such, they would have a perfect understanding of the clause and are not due any funds. In this case, the client can turn to the courts to seek their money back.
As well as returning the overcharged money due to the floor clause, the banks will also have to pay out interest on the capital. The mechanism will have to be in place a month after it is approved by the government. Once the bank has received the claim from the client, it will have three months to present an offer. If an agreement is not reached in this time, the mediation process will be understood to have concluded, and the client can seek legal recourse.
Compensation will be offered in cash as the first option, but the bank will be able to offer other products or mortgage conditions – ones that are more favorable than cash – should the client give their consent. The mortgage holder will have 15 days to give the bank an answer, during which time they will be able to check whether the offer is adequate via advice from lawyers or consumer organizations.
The government has been negotiating with the players involved in this issue since December in order to reach an agreement, after the European courts ruled against Spain’s banks and decided that they should return all funds that were judged via floor clauses (and not just since 2013, as the Spanish Supreme Court ruled) given that they were abusive and not transparent.