Spanish banks have lost a long series of cases over the last decade on mortgage clauses that were held to be unfair to consumers. Many of those rulings still generate claims today, and a good number of foreign owners on the Costa Blanca are affected without realising it.
This page covers the mortgage and banking claims we most often bring, and what to do if you are behind on payments.
Mortgage set-up costs
For years Spanish banks passed the whole cost of setting up a mortgage to the borrower: notary, Land Registry, agency fees and stamp duty. The Supreme Court held that allocating all of these to the consumer was unfair.
The result is that a borrower can generally reclaim the agency fee in full, and normally half the notary cost and all of the Land Registry fee. Stamp duty is treated separately and has been the subject of its own litigation.
These claims are time-limited, and the courts have moved more than once on when the clock starts. If you took out a Spanish mortgage, it is worth having the deed reviewed rather than assuming it is too late.
Floor clauses
A cláusula suelo is a clause in a variable-rate mortgage that sets a minimum interest rate, so when Euribor fell the borrower stopped benefiting. Where the clause was not transparently explained, it is void and the bank must repay everything overcharged.
Many borrowers signed a settlement with their bank during the 2017 refund scheme, often for less than they were owed. Whether that settlement blocks a further claim depends on how it was presented and whether the borrower was properly informed.
Revolving credit cards
Revolving cards, where a small monthly payment is set and the balance rolls over, frequently carry rates above 20 % APR. Spanish courts have annulled many of these as usurious under a law that dates from 1908, with the effect that the borrower repays only the capital actually drawn and recovers everything paid above it.
People are often surprised to find they have repaid several times what they spent and still owe a balance. That is the signature of a revolving card and it is worth checking.
IRPH mortgages
Some mortgages were indexed to IRPH rather than Euribor, which has generally been more expensive. The Court of Justice of the European Union has held that these clauses can be reviewed for transparency, and Spanish case law continues to develop. Whether an individual IRPH mortgage can be challenged depends on how it was sold.
If you are behind on your mortgage
Falling behind is not the end of the matter, and doing nothing is the worst option. The realistic routes are:
- Renegotiation of term or rate with the lender, which is easier before enforcement starts
- Dación en pago, handing back the property in full settlement of the debt, which requires the lender to agree
- Defending the enforcement, where the mortgage contains unfair terms; an unfair acceleration clause can stop the enforcement altogether
- The second chance law (Ley de Segunda Oportunidad), which allows an individual, including a sole trader, to have remaining debts written off after a court procedure
Spanish mortgage enforcement moves faster than most foreign owners expect, and the point at which a defence is available passes quickly.
Frequently asked questions
I am not resident in Spain. Can I still claim against a Spanish bank?
Yes. The claim relates to a contract signed in Spain over a Spanish property, and it is heard in Spain. You do not need to be here: we act under a power of attorney and correspond in English.
I already accepted a refund from the bank. Is that the end of it?
Not necessarily. Whether a settlement is binding depends on whether you were given enough information to understand what you were giving up. Bring us the paperwork.
How long do these claims take?
Set-up cost claims are relatively quick, often under a year. Floor clause and revolving card claims tend to take longer, particularly where the bank appeals. We tell you the realistic range for your specific claim before you commit.
What if I no longer have the mortgage deed?
Copies can be obtained from the notary who authorised it or from the Land Registry. We can request them for you.
Is it worth claiming for a small amount?
Where the claim succeeds, the bank is usually ordered to pay costs, which changes the arithmetic considerably. We tell you what we think it is worth before you decide.
Talk to us
Send us the mortgage deed or the card statements and we will tell you whether there is a claim and what it is likely to be worth. Contact us here, or call 654 581 493.