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In the UK the principle of a tracker mortgage is that it tracks the Bank of England base rate. Now, with an historical low Euribor of 0.15% anyone with such a mortgage should feel lucky, but perhaps due to the inclusion of a clause in the terms and conditions, you are not achieving the maximum savings.

This clause concerns the Minimum Interest Rate the bank is prepared to accept. In the UK this is called a “collar” (Clausula Suelo).
With the very low Euribor rates this means that spanish mortgages that have this clause will not have the maximum benefit from the current low interest rates.

If you can show that when you were sold the mortgage that you weren’t given a full KFI (Key Facts Illustration) of the clause, you could benefit from a further reduction in your mortgage payments.

Ausbanc consumo, a Spanish consumer association, sued BBVA, Caixa Galicia and Cajamar claiming that the Collar was an abusive clause and therefore should be declared null and void. On the 9th May, 2013 the Spanish Supreme Court (in judgment No 241/2013), ruled against the defendant banks BBVA, Caixa Galicia (NCG BANCO) and Cajamar, declaring the nullity of the Collar.

Mortgage clients of the above mentioned banks who have the “collar clause” in the contract should be asking for their payments to be recalculated and the refund of any overpaid interest.

Borrowers from the above mentioned banks are entitled to ask for the recalculation of the agreed benchmark plus differential, without applying the floor clause. They may also request a refund of the amounts paid previously.

The judgment only affects the borrowers of these banks with the specific clause in their contracts. Other borrowers can individually request the annulment of the provision and apply for a refund of the amounts paid.

The judgement states that the banks did not act in good faith in establishing these clauses given that they had advantageous access to financial information on future Euribor rates, breaching the trust of the client with the inclusion of the clause in the small print of the terms and conditions.

The Supreme Court also found that in establishing a maximum and minimum rate is  against the rights of the consumer, ie there is a lack of reciprocity (mutual benefit) in the contract, and therefore Article 8 Law 7/1998 of 13 April General Conditions of Contract in connection with Article 10a and First Additional Provision of Law 16/1984, of July 19, for the Defence of Consumers and Users (LGDCU) -currently regulated by Article 82 of TRLGDCU-declares the nullity of the clause, with the obligation of repayment of  overcharged interest.

BBVA and Cajamar filed an appeal against the judgment annulling the clauses, which was rejected and  were ordered to return the excess interest charged from the date of the original sentence. The said banks that launched the appeal have also been ordered to elimate the said clause from all future mortgages. Other bank entities continue to include the clause.


What to do?

  • The first thing to do is try to negotiate directly with the branch where you applied for the mortgage. They can remove the clause and return the overcharged payments.
  • If it doesn’t work you can also file a complaint to the Customer Service of the bank. The claim can be based on lack of transparency and lack of mutual benefit to all parties involved in the mortgage contract (reciprocity). It is important that you think back to the moment when you signed the contract because if the terms and conditions weren’t explained clearly then it is likely the bank failed to fulfil the Law 41/2007 SAC.
  • If the customer service of the bank decided against your interests, you can file a claim to the Bank of Spain based on the lack of reciprocity in the max and min rates if applied in in the binding offer.
  • If after the claim to the Bank of Spain the clause is not removed you can go to courts.

Cases in court involve more than 20, banks some which are: Novagalicia (Judgement from Orense Court), Cajamar (on 23 May, a Commercial Court of Malaga), Banco Popular, Banco Sabadell (told by a Barcelona court to return the extra interest as the clause in the mortgage was considered abusive), and Cajamar (made to return the extra interest charged).