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UNFAIR TERMS IN BANKING CONTRACTS: The current situation in Spain

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If you have a mortgage with a Spanish bank, particularly if it was subscribed between 2003 and 2009, there is a likelihood that your contract might contain some form of unfair terms (IRPH, floor clauses, etc). At BBS we deal with this kind of claims on a daily basis and our team of experts can study your case and advise you about your situation and most importantly, offer you solutions.

In Spain, the case law for unfair contract terms in banking agreements is quite extensive. With regards to mortgage loans only, there are several controversial terms. The main two have to do with interest rates. On the one hand, “floor clauses” which set a minimum interest decrease cap on the variation of the interest rate to be paid by the customer, have been found unfair by the Spanish Supreme Court. On the other hand, an index used by banks to determine the interest rates, known as “IRPH” has recently become widely challenged in the lower courts. This index has several variations, and in 2009 the European Union ordered the disappearance of 3 of its forms because of their susceptibility of manipulation by the banks, due to the way in which they were calculated. Essentially, “IRPH” is an average of the interest rates applied by the banks over a period of time. Consequently, they can easily influence the results. Furthermore, the Bank of Spain used, to calculate the index, the information provided by the same banks, which is confidential to the borrowers, therefore making its calculation not auditable. Despite all of this, it was not until 2012 that the Spanish government complied with the EU’s mandate to stop publishing the index.

Because “floor clauses” and “IRPH” cause the most significant harm to the borrowers, they usually represent the main claim before the courts, however, other examples of unfair terms often go together with them. Indeed, high default interest rates and rounding-up clauses have also been challenged for unfairness.


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