What is the “floor clause” of my mortgage?
The “floor clause” of your mortgage is, in popular slang, the minimum interest rate which we pay for our mortgage. Therefore, if and when the base interest rates of your mortgage go down, the “floor clause” prevents your mortgage payment from decreasing accordingly, as the minimum established rate is applied. The “floor clause” appears in the terms and conditions of the mortgage, but probably does not appear by this name.
Can I claim back the payments unfairly charged under the “floor clause”?
Following the latest ruling of the Court of Justice of the European Union, legal proceedings against banking institutions have again come to light, and this time, for retroactivity of the “floor clause”.
Therefore, it is now possible to claim for all payments which have already been made, starting from the date in which the mortgage was signed, but this does not necessarily mean that the banks will agree to refund the full amounts.
Here we have to consider two different issues:
- Firstly, each case has to be evaluated individually and an estimate made of the amounts which may be claimed, as this depends on each individual case and the banking institution involved, hence the exact outcome cannot be guaranteed, it may vary.To this, we have to add that if the mortgage has not yet been fully paid off, the removal of the “floor clause” may result in the reduction of the monthly payment of your mortgage.
- Secondly, we have to bear in mind that all banks which apply, or have applied, this clause are affected by this ruling, although they may make an offer to reimburse the amount which, in their opinion, they believe they should refund (which is much lower than what the client can claim for) and may even consider the claim to be unfounded. In the event of the claim being considered and a refund of the payments being awarded, this does not mean that this will be done in cash: the client and the banking institution may agree to bank services as compensation.
How should I proceed to claim back my money?
At the present time, there are two procedures available to the client to claim back his or her unfair payments of the “floor clause”:
1.- Out-of-court procedure: “fast and free”
In January 2017, the Government approved the Royal Decree of urgent measures to protect the consumer, through which the whole process of claiming against the “floor clause” can be made via an out-of-court procedure, to resolve the customers’ claims in a “fast and free” manner.
In practical terms, this legal procedure states that the banking institution has three months in which to make a proposal to refund the payments to the customer.
How the out-of-court procedure works:
Once the client files a claim against his banking institution for the refund of the payments, the bank needs to reply with a calculation of the amount to refund plus accrued interest or, alternatively, a justification as to why it does not consider the refund of the amounts paid to be warranted. If the customer agrees with the bank’s decision, he has to accept the conditions and the banking institution will refund the money within a maximum period of three months.
But not all refunds are made in cash (in spite of the fact that it is set up as the first option), instead the banking institutions and the consumer may agree upon different compensation methods, like new products or new mortgage terms, such as lower monthly payments or principal.
In our opinion, this procedure favours the bank more than it does the borrower, as it leaves the decision of these disputes in the hands of the bank and, as a result, the amounts refunded to the customers.
If the client does not agree with the bank’s decision, he has the right to request a refund via legal channels (once the time limit for the out-of-court procedure has expired), which requires the hiring of a lawyer to handle the case.
How the legal procedure works:
To begin the legal proceedings to claim for the unfair payments made, the mortgage contract needs to be studied, by recruiting a professional to accurately establish the amounts which need to be claimed. At Colorado & de Roa Advocats we have decided to set up the study of each individual case, so that each person knows how much they can claim for and, based on that, can decide upon filing his case.
After that, we begin by making a claim directly with the bank and, in case we do not get the desired result, we resort to the courts, which is the way in which, nowadays, we have the most confidence in settling claims resulting from the banking products which they have unfairly sold to customers.
Once the legal procedure commences, it is carried out right through up to the final judgement.
How can we help you to claim back your money?
At Colorado & de Roa Advocats, we have been handling legal proceedings against banking institutions for years, in which we represent consumers who have been victim of the unfair practices which, especially during the boom period, were omnipresent in banking contracts.
The list of harmful products commercialised by the banking sector is extensive and, in our office, we have had the opportunity to fight alongside our clients against the institutions which are to blame. We are beginning to file proceedings against the marketing of swaps (interest rate permutations), followed by fraudulent share and subordinated debt issues, different types of convertible bonds, “floor clauses”, multi-currency mortgages, and many others.
The experts at Colorado & de Roa Advocats are at your disposal to advise you on your case and to help you recover what is yours, offering you personalised attention which will allow you to be constantly informed of the status of your case, as well as of all the latest developments which may affect you.
Colorado & de Roa Advocats recommend that those affected come forward to get information on their case as soon as possible, mainly concerning the amounts which may be recovered and how eliminating the “floor clause” would affect the monthly payments of their mortgage, in those cases where this continues to be applied.
Following the shake-up for our current and potential clients which has resulted from the news, at Colorado & de Roa Advocats we have decided to set up the study of each individual case, so that each person knows how much they can claim for and, based on that, can decide upon filing his case.