Financial Claims Solicitors

Banks Told to Pay Compensation for Floor Capped Mortgages in Spain

Posted on: January 23rd, 2017

Dozens of Spanish banks in have been told to pay compensation for floor capped mortgages in Spain or face legal action by up to 2.5 million property owners.

During the international property boom, thousands of UK investors and families looking for a holiday home in the sun bought a property in Spain. Many took advantage of mortgages offering a low introductory interest rate followed by a variable rate linked to EURIBOR. What many did not realise was that the mortgage agreements included a “clausula suelo” or “floor cap” clause that stipulated if the EURIBOR rate went below a certain level, lenders could apply a minimum interest rate.

The EURIBOR rate was slashed in 2008 following the worldwide collapse of the property market. However, rather than charging less interest on the outstanding property loans, more than forty Spanish banks applied a similar or higher interest rate as before – causing considerable financial hardship for property owners, multiple mortgage defaults, and 90% of evictions. Many property owners felt they had been treated unfairly, as the “floor cap” clause had never been explained and was often only briefly mentioned among lengthy and complicated terms and conditions.

Attempts to recover compensation for floor capped mortgages in Spain were initially unsuccessful. Courts often found in favour the banks, who argued it was the purchaser´s responsibility to read and understand the terms and conditions of the mortgage before agreeing to it. However, in May 2013 – during a court case against Spain´s second-biggest lender BBVA – Spain´s Supreme Court ruled that BBVA´s floor cap clauses were unfair, and – although not prohibiting them – ruled that the clauses should be voided in all past and current mortgage agreements.

As a result of the Supreme Court´s ruling, 15,000 property owners brought a class action claiming compensation for floor capped mortgages in Spain. In April 2016, Judge Carmen Gonzalez found in the claimants´ favour and said that “quantities improperly charged” since May 2013 should be refunded. The verdict caught the eye of European Commissioners, who felt that, if the unfair clause was to be voided, it should be voided from the beginning of the agreement and compensation paid in full.

Spanish banks contested the Commissioners´ view – arguing that, if they paid compensation for floor capped mortgages in Spain from the start of every eligible mortgage agreement, their liabilities would exceed €4 billion. The banks claimed the liabilities would cripple the already unsteady banking sector. The Commissioners disagreed and, in December last year, the European Court of Justice ruled that compensation for floor capped mortgages in Spain should be paid in full.

Conscious of the potential for up to 2.5 million claims, the Spanish government acted quickly and last week announced the process through which banks would pay compensation for floor capped mortgages in Spain over a three-month period. The process starts with the lenders identifying which customers signed mortgage agreements containing the contentious clause. Banks then have to write to each customer with an offer of settlement.

If the offer of settlement is considered inappropriate and no agreement can be reached within three months, or mortgagees are not contacted by their lender within three months, the “extra-judicial procedure” will be considered concluded, allowing property owners to pursue compensation for floor capped mortgages in Spain through the courts. As ever, we advise those affected by this latest development to seek professional legal advice from a solicitor familiar with the Spanish real estate market.

Fund to Pay Barclays PPI Refund Compensation Tops £5 Billion

Posted on: October 30th, 2014

The fund to pay Barclays PPI refund compensation have been increased to more than £5 billion following a £170 million addition to the fund in the last quarter.

The third quarter “Interim Management Statement” reveals that between July and September the company set aside a further £170 million for pay Barclays PPI refund compensation. The extra provision bring Barclays´ total fund up to £5.02 billion following a £900 million provision during the second quarter of the year.

The report also reveals that the company paid out £291 million in Barclays PPI refund compensation during the third quarter of the year.  A comment alongside this figure in the report indicates that the bank is expecting a decrease in the number of customers claiming Barclays PPI refund compensation throughout the remainder of the year – which will also result in a reduction in handling costs.

Observers have noted a significant discrepancy between the £5.02 billion put aside to pay Barclays PPI refund compensation and the amount paid to date (£3.8 billion since January 2011). It would appear that there is more than £1.2 billion still available for customers to claim Barclays PPI refund compensation, and there are two possible explanations for this discrepancy:

The Financial Conduct Authority registered 278,426 complaints about Barclays during the first six months of the year – more complaints than for any other credit provider. 70% of the complaints related to Barclays PPI refund compensation – either because claims handlers at Barclays had unjustifiably rejected customers´ claims, or had underpaid settlements of PPI compensation.

There is also a significant number of complaints waiting to be investigated by the Financial Ombudsman Service about the way in which the bank has handled Barclays PPI refund compensation claims. Barclays was recently identified as one of four credit providers deliberately miscalculating PPI refunds by deliberating overlooking charges triggered by PPI premiums – in some cases reducing the amount of compensation due to customers by 50%.