Spanish banks forced to pay billions in compensation to borrowers (+Start your claim)

by Legal editorial team
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Millions of 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”.

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

Put simply, most borrowers with illegal floor clauses are paying too much.

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

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 that must be returned and, if the client agrees, make the payment. The whole process must take no longer than three months.

That may work for residents and Spanish-speakers, but how easy will it be for 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?

As if that weren’t enough. Spain’s supreme court has highlighted the setup fees 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.

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.

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