The Great Spanish Mortgage Scandal! (+Start your claim)

by Legal editorial team
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In Brief

Over the past decade many Spanish banks have issued mortgage agreements that have been found to contain “Abusive” clauses resulting in borrowers paying far more in set up costs and interest on their loan than they should be.

The European Court of Justice and Spanish Supreme Court has ruled that such clauses are unlawful and that mortgage holders are now entitled to challenge them.

They can apply to the courts to have their mortgage reduced, reclaim overpaid interest and recover set up costs.

Note: For a clause to be ruled “Abusive” under Spanish law, it must inflict harm on the consumer and benefit the professional who drafted the contract. An “Abusive Clause” can only be ruled so by a Judge.


Variable-rate mortgages or Tracker mortgages are common in most countries and are designed to protect both the lender and borrower from unpredictable volatility by reflecting the cost to the lender of borrowing on the credit markets.

If interest rates are high then the cost to borrow is high.

Conversely, if interest rates fall, the cost to borrow falls.

Over the last decade, more than 400,000 Brits have bought a Spanish property, many took out variable-rate mortgages that track the Euribor or European Interbank Offered Rate.

The Euribor is a daily updated reference rate that averages the interest rates in the Eurozone.

As mortgages tend to run for a significant amount of time, a variable-rate mortgage which tracks a particular market or index will rise and fall, in theory, balancing out over the life of the loan, making it fair for both lender and borrower alike.

Many Spanish banks introduced clauses into their agreements which adversely affected the balance of this mechanism, unfairly weighting it in their favour.

The “floor clause” (clausula suelo) which banks added to the small print of up to 4million contracts and was common in loans taken out between 2007 and 2009, set a limit on the minimum interest rate a lender can charge, so regardless of how low the Euribor base rate fell, borrowers continued to pay interest at the fixed minimum rate, around 3%, despite having variable-rate mortgages.

Euribor collapsed with the economic crisis in September 2008, dropping from 5.38% to 1.26% in September 2009 and has been mostly negative since February 2016. When Euribor falls below 2%, where it has been for most months since March 2009, it leaves millions paying far more interest on their loans than they should be.

Now, Spanish mortgage holders, including thousands of Brits, could be due for a massive windfall as a result of judgements passed by the European Court of Justice and the Spanish Supreme Court, which found the Spanish banks treatment of their customers was “abusive”.

Estimates are that there is about €4bn in refunds waiting to be claimed with every Spanish bank potentially implicated and the average British buyer due to collect €15,000 or more.

Although floor clauses in themselves are not illegal, the scandal has been, they were not adequately explained, or even not mentioned at all to borrowers, many of whom were unaware these clauses were buried in the small print of their mortgage contracts,

Foreign borrowers, in particular, were likely to be unaware of the existence and implications of floor clauses, thanks to language barriers and living outside Spain in many cases.

In 2013 the Spanish Supreme Court ruled that any “floor clauses” that had not been properly explained were deemed to be “abusive” and therefore null and void, entitling mortgage holders with these clauses in their contracts to claim a full refund for overpayment going back to 2013.

In December 2016, after much lobbying by consumer groups, the European Court of Justice ruled that all such cases had full retroactivity and therefore no time limit.

Borrowers can now claim for overpayment of interest on their loan, going back to the commencement of the mortgage.

That may work for residents and Spanish-speakers, but how easy will it be for foreign owners to navigate their way through bank bureaucracy, in a foreign language, from 1,000 miles away, and to persuade them to cough up thousands of euros?

On January 20th 2017, the Spanish Government passed a Royal Decree 1/2017 that set out an extra-judicial process for “floor clause” claims.

Although it was anticipated as a measure that would protect consumers, making the claim process quicker and cheaper by avoiding litigation, in reality it massively favours the banks, once again leaving borrowers at a disadvantage.

The Spanish government has announced that banks must set up departments to deal with such claims and inform clients with floor clauses about the reclaim system.

The bank must then calculate the amount to be returned and, if the client agrees, make the payment. The whole process must take no longer than three months.

If the client does not agree and pursues the bank through the courts, they face the prospect of having to pay legal costs if the court does not improve on the offer made by the bank.

This procedure, intended to protect consumers rights, in fact, strengthens the position of the banks, with customers fearing that offers of compensation will be lower than expected.

Anyone wishing to claim for overpayment of interest must follow the extra judicial process or face the threat of legal fees and court costs if they don't.

Banks get to decide what settlement to offer, based on their own criteria and with no penalty for not offering full compensation. How many foreign borrowers are in a position to know if settlements are just or not?

How many foreign borrowers will be able to calculate how much they've really been overcharged in interest payments due to hidden “Floor Clauses” and how many will be able to deal with the extra judicial process or even understand it given the language barrier in many cases.

The decree doesn't oblige banks to pay claimants in full and when lenders can pay any settlement they deem fit, it is believed that many people will be left with no alternative but to take court action.

Set up costs

Spain’s Supreme Court has also highlighted the setup costs that borrowers have traditionally paid when they get a Spanish mortgage.

They include stamp duty, notary, land-registry and admin fees, and they amount to about €3,000 on a €150,000 mortgage.

The clauses introduced by some lenders, forcing borrowers to pay all fees related to taking out the mortgage were found to be abusive.

Last year, the court decided that the banks should pay all, or at least some, of these fees, as it is in their interest, not the borrower’s, to protect the loan by getting it notarised and registered.

Now the ruling, known as 705/2015, is making headlines as it filters down to regional courts across Spain.

Each region has its own interpretation, but all agree that claims can be made for fees paid since December 23, 2011, and that you have until December 24, 2019 to do so.

Several banks including Santander and BBVA have changed their policies in recent months in an attempt to avoid further lawsuits. They now pay about 30% of fees.

It will take some time to see how big the retroactive claims for registration costs can be but it has the potential to be even bigger than the floor clause issue, because it is likely to involve every client who has taken out a mortgage.

This includes British owners too but most aren’t aware and they may well benefit from looking into this.


We are an international legal services company specialising in claims management and currently representing Spanish lawyers/abogados involved with property finance claims in general and “floor clauses “mortgage claims in particular.

We have over 30yrs experience in claims management procedure and our success is due to the commitment and dedication of our legal and admin teams, who's expertise and attention to detail provide consistent results.

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Cross-border claims are often very complex and time consuming. Every country has its own legal approach and method for handling claim procedures. Therefore, international claims management requires strong organisation, local expertise and multilingual staff. Working closely with our team of lawyers, we are able to asses and process your claim in the most efficient and cost effective manner, often bypassing traditional obstacles to bring a swift resolution. Our methods of working are transparent and reliable and can be monitored in real time via our on line customer claims tracking system.

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Related blogs

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02 of 22 About The Great Spanish Mortgage Scandal!

03 of 22 About Spanish banks forced to pay billions in compensation to borrowers

04 of 22 About Making your claim - the process and cost

05 of 22 About Key information you require about your past and future borrowing from Spanish banks

06 of 22 About Dissapointment, that the floor clauses procedure leaves much to be desired

07 of 22 About Briefly, your right to reclaim

08 of 22 About Eaten alive - by abusive mortgage 'set up' costs.

09 of 22 About Floor-clauses - 'clausula suelo. - a history

10 of 22 About Lifetime Loans or Reverse Mortgages in Spain Explained

11 of 22 Advice to Struggling Mortgage Borrowers in Spain

12 of 22 A warning about Spanish Mortgage Loans: Beware of Abusive Clauses – 8th January 2012

13 of 22 An overview of Spanish Mortgage Loans: An Overview – 21st February 2012

14 of 22 About Bank Repossessions in Spain – 21st February 2014

15 of 22 About Spain's Bad Debtor’s List (‘Fichero de Morosos’) – 8th April 2014

16 of 22 About Spanish Creditors Pursuing Debts Abroad – 8th May 2014

17 of 22 Crucially Dación en Pago explained, or, How to Hand Back the Keys – 8th December 2014

18 of 22 Report about of how the European Court of Justice Slams Floor Clauses (‘Cláusulas Suelo’) – 27th December 2016

19 of 22 Warning, that buyers in Spain from the British Isles struggle to recover refunds due to them

20 of 22 Warning, that English speaking clients of Spanish Banks have been systematically cheated for years

21 of 22 Warning, that CJEU conclusively overturns the floor clauses

22 of 22 Warning, that EURIBOR - the promises at the heart of the Spanish Bank deception

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