A Spanish Bank forced by the Court to eliminate the so called floor-clause or “Cláusula suelo” that sets a limit to the decrease of variable interest rate in its mortgages.

07 Dec A Spanish Bank forced by the Court to eliminate the so called floor-clause or “Cláusula suelo” that sets a limit to the decrease of variable interest rate in its mortgages.

The Court for Mercantile litigations in the Spanish city of Leon forces bank Caja España-Duero to eliminate the widely extended clause that sets a limit to the decrease of variable interest rate in its mortgages.

The Court has ordered Caja España-Duero to eliminate the so called floor-clause or “Cláusula suelo” of its hypothecating contracts in cases in which such clause is agreed at the present time and to abstain to use it in the future, according to the order dictated on 11th of March 2011.

The judge gives a term of three months to the bank entity to automatically eliminate the clause, with no need for each one of the clients to ask for this elimination by the bank.

The Ausban association, claimant of the legal procedure, considered that the Order of provisional judicial execution represents “a great advance” in the process and a “great benefit” for the users, since they will be able to eliminate this “abusive” clause from their hypothecating contracts from the present moment, with no need to wait for a final ruling sentence to be dictated, a fact that will bring a saving of money in their monthly payments in an immediate way.

The order of execution is confined to mortgages signed by consumers agreed to be subject to variable interest rate, in which there is a clause setting a minimum rate while there is not a one of maximum rate that compensates the risk in an equitable way.

In this way, the order will be of application in all mortgages having such floor and without ceiling, as well as in those ones having such floor and a ceiling equal or higher than 12%.

The association explained that for a family with an average mortgage of  150,000 euros, this measurement will represent an approximate annual saving of 1,000 euros, whereas the financial entity could see its income decreased in 50 million Euros per year due to such clause’s invalidation.