A Legal Ruling Declares the “Floor Clause” Null And Void

21 October 2010

On September 30, 2010, Seville Commercial Court no. 2 declared the so-called “floor clauses” stipulating mortgage interest rate minimums null and void due to their abusive nature.

The Bank Service Users Association (known by the Spanish acronym Ausbanc) based their claim on the fact that the so-called “floor clauses” prevent the interest rate from going below a baseline minimum. The abuse resides in the damages resulting from the application of this clause to the borrowers, who do not benefit from any decreases in the index of reference for mortgage loans (Euribor).

The ruling deemed said clauses abusive and therefore null and void and ordered BBVA, Caja de Ahorros de Galicia, Cajamar and Cajamar Caja Rural to eliminate said clauses from mortgage contracts and refrain from using them in the future.

Likewise, said ruling cites the imparity between the floor clauses and the “roof” clauses (which stops interest rates from exceeding a maximum amount) in mortgage loans, since the maximum indicated in the clauses would be nearly impossible for the borrowers to pay and bears no resemblance to the floor.

This ruling opens the door to claims for repayment orders by borrowers (repayment of unduly paid amounts and the elimination of the clause for future mortgage payments).

Without prejudice to the foregoing, the lenders have yet to file their appeals with the Seville Provincial Courts.

Consequently, in order to file an action for repayment of unduly paid amounts there must be a final ruling on the nullity of the “floor clauses”, however, as regards the court order to eliminate said clauses, this could be enforced on a provisional basis.

For further information in this regard, please contact Iván Mateo imateo@mmmm.es