Floor clause mortgage success

Floor clause mortgage success
Photo Credit: Pxhere

SPAIN’S Supreme Court has ruled people who have already renegotiated their mortgages with their banks can still reclaim their money in court.

The decision means anyone whose bank has agreed to lower their interest repayments can still reclaim excess interest payments made in previous years.

While the move may mean lower monthly repayments and lump sum pay-outs for thousands, it seems they may have years to wait for court settlements. In September it was revealed thousands more people than expected had submitted floor clause mortgage claims since a specialist court opened in June, leading to significant delays.

Just one court in Malaga city was assigned to deal with the banking claims from across the entire province, however, and has now received 2000 cases, double the amount expected.

After a European Court of Justice ruling last December, people who believe they were sold a floor clause mortgage have been able to claim the money back.  Lawyers, prosecutors and judges had voted unanimously against forcing one court to deal with so many claims.  It now seems their concerns were well-founded as the court has since received twice the expected annual amount in just two months.

According to one judge, Jose Maria Paez,”unless more resources are allocated, it will be very difficult to process this number of demands without incurring big delays.”

Belen Rincon, a lawyer specialising in bank claims, explained claimants have been forced to take their cases to court after banks have been reluctant to pay out.  He claimed as a result, “it is estimated that the limit of cases that can be treated by a standard court a year is 1,700 or 1,800; after that it collapses.”

He added this will affect how long it takes to deal with each case, explaining, “taking into account that in two other courts, which have four judges, they are looking at settling claims in 2021, it is clear that claimants will have to be patient.” He added banks are taking advantage of the backlog and offering smaller compensation packages for early settlement, explaining, “many consumers end up accepting even though it is unfair because they cannot afford to continue paying the interest for four more years more.”

A second specialist court to deal with these claims is planned for Malaga but no date has yet been announced.  Jose Maria Paez believes at least another four may be necessary to deal with the weight of cases.

Floor clauses were the fixed interest rates hidden by banks in the small print of mortgage contracts. The European Court of Justice ruled in December last year that Spanish banks must pay back the money they made from consumers, the bill for which is expected to run to billions of euros.

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