Clausula Suelo News

BBVA to remove mortgage floor clauses

  • BBVA and Cajamar will remove mortgage floor rates
  • Banco Popular and Sabadell resist in bid to avoid losses
  • 425,000 customers could benefit
  • These clauses must be removed if there is a lack of transparency

The BBVA, Spain’s second most important bank after Santander, is to stop applying the ‘floor clause’ from its variable interest rate mortgage contracts after a ruling from the Supreme Court deemed it abusive when lacking in transparency.

BBVA will remove the interest-rate floor clause retrospectively from 9 May 2013, the date on which the court ruling took place.

The bank has 800,000 mortgage contracts in Spain and approximately two-thirds of them, 530,000, have been set with a floor clause.

Around 425,000 are negatively affected by this product and are covered by the Court’s recent ruling. They will thus see the clause removed from their contracts and will be able to benefit from the current low interest and Euribor rate.

Calculations based on the one-year Euribor rate at today’s levels determine that the removal of the interest-rate floor clause from these mortgages will suppose a 35-million-euro reduction in the bank’s profits in June.

Banks involved

BBVA is not the only bank that is set to remove this abusive clause from its mortgage contracts.

Cajamar Caja Rural has also announced that it will proceed with the “immediate removal” of these clauses from all mortgages starting from 9 May.

NGC Banco is yet to say how it will apply the Supreme Court judgement as the document is being revised and studied by its legal team.

Banco Santander has assured the media that his bank has never applied the floor clause rate in any of its mortgages, the same as Caixabank, Caja Madrid and Bancaja.

The ruling

The judgement made by the Supreme Court stated that while interest-rate floor clauses are not illegal, if there is any evidence of lack of transparency legally required they must be removed. The Court in its ruling identified six areas in which these clauses could be deemed illegal.

Marketing ploy

The Association of Bank, Savings Bank and Insurance Users (Adicae) celebrated the ruling, which it says has taken a long time in coming, especially after numerous sentences that the banks have previously just ignored. Adicae thinks it could just be a marketing ploy to improve the banks’ reputation, particularly as there is no incentive for them to change their position and returning the money to their customers could result in the bank’s ruin.

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