Many banks forced “agreements” with clients trying to eliminate the floor clauses in exchange to better interest rates but without paying all the monies overpaid by consumers back or paying back just a small amount. The validity of these agreements is expecting a ruling from the EUCJ.
Floor clauses modification agreements
Many banks try to reduce the impact of the court rulings on the floor clause nullity trying to reach agreements with the affected clients. Even before the situation was definitely clear from the courts point of view the banks offered modification agreements to the clients. The majority of them were just private agreements and other ones were signed before a public notary to register the modification in the Land Registry where the mortgage is registered.
Content of the agreements
If the client had a floor claus of 5% for instance the bank offered to eliminate it and reduce the floor to 3% or to have a fixed rate for the rest of the mortgage at 2,5%. Some agreements included some money back due to the application of the previous floor clause.
Also, the agreements included a stipulation where the client renounces to make any claim to the bank based on the nullity of the floor clause. Actually, the agreement stated that the clause was valid and that both parties acknowledge its validity.
Whilst these agreements were offered mainly before the floor clause was clear enough from the courts point of view the clients had a lot of pressure to accept the agreements in order to avoid losing more money or reduce the damage as much as possible.
Modification agreements validity
As well as any other condition imposed by a professional to a consumer the validity of the agreement will depend upon the following circumstances:
- The agreements are offered by the banks and the conditions imposed and drafted by them. It is no a proper agreement.
- The agreements hide information and lies with regards the validity of the floor clause. If they are void and null they are so from the beginning because they are against the law. No agreement can save this kind of nullity.
- Clients did not know what they were renouncing to specifically. The banks should say to the client: the floor clause is very likely to be void and null. We have overcharged you thousands of euros on interests which you should received back. And after you receive the money we can talk about a mortgage modification which is very likely not to be good for you because the EURIBOR now is under 0% and you are paying just the percentage added to it and I am offering you to pay a few points more expensive interest rate. This would be the correct thing. But, it seems obvious that if the banks do things right no modification agreement would have been signed at all.
Conclusion: EUCJ at consumers’ resuce again
So, again the EUCJ comes to the rescue of Spanish consumers and will decide on whether theses agreements are abusive or not. And in my opinion, they are void and null in the majority of the cases at least. And the banks will have another reputation crisis which it seems not to affect them much in my view anyway. I hope the EUCJ will give of all the cosnumers a nice ruling very shortly. In December the General Attorney of the EUCJ will publish their conclusions on the matter. Meanwhile, the Supreme Court decided at the beginning of September to put on hold all the procedures is dealing on this subject as it was published yesterday in a leading Spanish paper. And most probably, the rest of the courts will follow the same route so we will have to wait and see. Again.
Thank you for your time and attention and I hope this information is of use. You are very welcome to share if you liked it. You might be interested on this other floor clause post.
Please, note that this is general information. This is not specific legal advice. It is advisable to seek legal advice for any specific legal issue.