A judge will put the entire Spanish banking sector on approval about the controversial “ground clauses, or cláusulas suelo” of the mortgages.

A judge will put the entire Spanish banking sector on approval about the controversial “ground clauses, or cláusulas suelo” of the mortgages.


law3Practically the whole financial sector will be subject to trial in front of  the judge in what refers to the controversial “ground clauses, or cláusulas suelo”, that prevented numerous mortgaged Spaniards or Spanish residents to benefit from the strong slope of the interest rates experienced from end of 2008.

It was known yesterday that the Court for Mercantile matters number 11 of Madrid has admitted to proceeding the greater collective claim presented in Spain against 45 Spanish banks.

The claim, interposed by the association of consumers ADICAE, has been presented in name of about 400 clients, although the number could increase in the next days since, due to it being a collective action, the Court has ordered the suspension of the process for a term of two months so that new interested parties can join. The term to get up to this first claim has been extended at least until end of March.

In a report by the Bank of Spain elaborated at the request of the Senate in May of 2010, it was considered that in Spain 3.8 million people are having this type of clauses in their hypothecating contracts.

The clauses are legal

The famous ground clauses, or cláusulas suelo are clauses included by the banking organizations in many contracts of hypothecating loans establishing a certain level from which the rate of interest is not reviewable to the loss even though the EURIBOR, main reference index of the interest rate for mortgages in Spain, continues its reduction. This level is usually located over 3%, although it varies much of a banking organization to another. It can even arrive at 5%.

These clauses, legal and negotiable, but whose existence a great part of mortgaged population did not, or said not to, know caused and continues causing the popular indignation, since many of the mortgaged people have seen  a constant fall of the interest rates in both last years, from 4.25% in October of 2008 to 1% in May of 2009, while such thing has not been translated in a reduction of their monthly payments.

Between the sued organizations are most of Spanish banks and Cajas: BBVA, Banco Popular, Banco de Galicia, Banco Guipuzcoano, Banco Pastor, Banco Vasconia, y Banco Gallego, además de CAI, Caixa Galicia, Caja Castilla La Mancha, Caixa Girona, Caixa Nova, Caixa Manresa, Caixa Ontinyent, Caixa Penedes, Caixa Sabadell, Caixa Rural de Balears, Caixa Tarragona, Caja Círculo, Caja de Ahorros de Cataluña, Caja Extremadura, Caja Badajoz, Caja Duero, Caja España, Caja Canarias, Caja Granada, Caja Insular de Ahorros de Canarias, Multicaja, Caja Rural de Asturias, Caja Rural de Cuenca, Caja Rural de Navarra, Caja Rural de Granada, Caja Rural del Sur, Caja Segovia, Caja Sol, Caja Sur, Cajalon, Cajamar, Ipar Kutxa, Unicaja, Caixa destalvis Unio de Caixes de Manlleu, Sabadell i Terrassa, Caixa destalvis de Catalunya, Tarragona i Manresa o Caja de Arquitectos. The association has announced that its claim will be extend towards other banks such as Santander or La Caixa.

They request the annulment of the clauses

In the claim, ADICAE requests the annulment of these clauses due to them having a manifest disproportion between the grounds and the ceilings of interest rates fixed into the hypothecating contracts.

The elimination of these grounds would have a tremendous impact in the sector, since, as has been already advanced by Cotizalia newspaper, it would reduce the profit margins of the banks in a radical way, to such an extent, that they could not generate a  benefit enough to cover the strong provisions derived from the dilatoriness, a fact that, in addition, would bring losses for numerous banking organizations.

So far, a quite recent judicial antecedent exists on the matter. In October of 2010, the Court for Mercantile Matters number 2 of Seville dictated the first sentence in Spain declaring as abusive the ground clauses of the mortgages of BBVA, Caja de Ahorros de Galicia, Cajamar and Cajamar Caja Rural, who were forced to eliminate them and to abstain to use them in future contracts. The banking organization presided by Francisco González resorted to the judicial verdict, describing it as an “isolated” one.

The Bank of Spain, on the other hand, put itself by the side of the financial banking organizations in May of 2010 after publishing a report about ground clauses  previously asked by the Senate. The mentioned report calculated in 29% the percentage of mortgages granted to the Spanish families subject to these grounds. In the report it was stated that the tops limiting  the impact of the rates of interest in the mortgages “constitute, from the legal point of view, just one more part of the price of the loan”, reason why “whenever they are included in written up clauses of clear and comprehensible way, they must be considered freely agreed”, and “there will be no reason to declare them as abusive ones”.

However, the supervisor admitted the lack of symmetry between clauses of grounds and of ceilings (clauses that restrain the ascent of the interest rates from a different level): In most of the cases, the ceilings do not offer an effective protection to the particular clients from the risk of ascent of interest rates , due to the high levels they reach. In fact, the families will not be protected while the interest of the mortgages does not surpass of average 13.56%.

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