How to claim abusive conditions in mortgage loans

In this article we explain step by step how to claim abusive conditions in mortgage loans and other financial products. Our specialist lawyers will guide you in the process of recovering money overpaid to banks due to abusive clauses.

In the complex wordings inserted in mortgage loans, floor clauses (or minimum interest rates) have become the subject of frequent legal claims. These provisions, which limit downward the variation in the interest rate on loans, are a source of litigation due to their clear direct economic impact on consumer rights; seriously harming their interests and favoring banking entities. Definition and operation of the Floor Clauses or Minimum Interest Rates Floor clauses are contractual provisions that establish a minimum limit on the downward variation of the interest rate on a mortgage loan. This means that, even if the reference index (generally, the most common is the Euribor) falls, the interest that the borrower (the one to whom the money is lent, the one who receives it) must pay cannot fall below the threshold. established in the floor clause. Minimum interest rates impose a downward limit. These provisions establish that, under no circumstances, can the interest rate applicable to the loan be less than a certain percentage, regardless of financial market conditions. The characteristic of such clauses is to protect the lender from excessive downward fluctuations in interest rates but, in return and at the same time, they are very detrimental to the borrower by limiting his ability to benefit from favorable market conditions. . Example: quantification of the economic impact of a Minimum Interest Rate Clause in a mortgage loan Let's imagine a scenario where a borrower requests a mortgage from a bank for 150,000 euros; with a variable interest rate based on the Euribor plus a differential of 1%. The Euribor in 2016, for example, was 0% (having had years with even negative rates), so the initial interest would be 1%. However, the mortgage loan contract includes a minimum interest rate clause of 2%, which means that, even if the Euribor drops, the borrower will pay at least 2%. This results in a 1% (2% - 1%) excess interest that the borrower overpays compared to what it would be without the clause.

If we consider a period of five years and assume that the Euribor remains at 0%, the borrower would be paying 2% interest instead of the 1% that would correspond without the clause. On a mortgage of 150,000 euros, this translates into an additional payment of no less than 1,500 euros per year; 7,500 euros during those five years. Floor clauses often translate into significant overpayments for borrowers, which reinforces the need to file the corresponding legal claim seeking their nullity. Graphic evolution of the Euribor (main reference interest rate in mortgage loans) during recent years:

Legal claims of invalidity in relation to floor clauses and minimum interest rates are based on various legal bases. Some of the most recurrent arguments used by our Courts to determine the nullity of this type of clauses are the following: 1. Lack of Transparency: The lack of transparency in the inclusion and explanation of these clauses in mortgage contracts. Case law has highlighted the importance of consumers having a clear and comprehensible understanding of the economic implications of these provisions. In the case known as "Floor Clause" (STS 241/2013, of May 9), our Supreme Court established that the lack of transparency in the inclusion of floor clauses is a determining element for their nullity. The lack of transparency can lead to the nullity of the floor clause, allowing consumers to recover amounts unduly paid. 2. Abusiveness: Another line of argument is based on the consideration of these clauses as abusive. Article 82 of the Consolidated Text of the General Law for the Defense of Consumers and Users establishes that clauses that, contrary to the requirements of good faith, cause a significant imbalance in the rights and obligations of the consumer to the detriment of the consumer, will be considered abusive. the parts. In this sense, the Court of Justice of the European Union (CJEU) has declared that floor clauses can be abusive if they have not been presented in a clear and understandable manner (STJEU of December 21, 2016, case C-154/15) . 3. Limitation of Interest Rate Variability: Floor clauses limit the downward variability of the interest rate, which can be considered contrary to the very nature of variable interest loans. This argument is based on the idea that the essence of variable rate mortgage loans lies in the possibility of interest fluctuating according to financial market conditions. Restricting this variability could be contrary to the principle of good faith and contractual balance. On the part of the banks, the so-called ceiling clauses or maximum interest rate applicable to the loan are usually included in compensation; from which rates higher than them would not be applied.

But they are such high interests that they are never reached under normal market conditions; Therefore, they generate in the borrower the false illusion that there is a contractual balance (floor and ceiling) in the mortgage loan, when the truth is that only the bank benefits from these clauses.

Legal claims of nullity in relation to floor clauses or minimum interest rates in mortgage loans are frequent before our Courts.