UK Financial Claims

Banks Given Three Months to Resolve Spanish Mortgage Floor Claims

Saturday, 21st January, 2017

Banks who sold mortgages containing “clausula suelo” clauses have been given three months by the government to resolve Spanish mortgage floor claims.

Throughout the Spanish property boom of the 2000´s, up to 2.5 million mortgage agreements were signed containing a “clausula suelo”a clause that stipulated a minimum interest rate that could be charged on the loan if the variable rate fell below a certain level.

This “mortgage floor” led to many property owners making far higher repayments than they would have done when EURIBOR interest rates were reduced after the property crash in 2008. The higher repayments also led to multiple mortgage defaults and evictions.

Many felt that the banks had acted unfairly, as the mortgage floor clause was often contained within the small print of lengthy and complicated mortgage agreements. Several mortgage floor claims were made by unhappy property owners, but few were successful until May 2013.

In May 2013, Spain´s Supreme Court ruled that mortgage floor clauses in BBVA´s mortgage agreements lacked transparency and were unfair. This led to a class action of more than 15,000 Spanish mortgage floor claims that resulted in April 2016 with Judge Carmen Gonzalez ruling that property owners were entitled to compensation for “quantities improperly charged”.

Judge Gonzalez stipulated in her ruling that only overcharged amounts from May 2013 could be recovered. However, European Commissioners investigated the judgement on the grounds that if – as the Supreme Court found – the clauses were unfair and should be voided, they should be voided and compensation paid from the beginning of the mortgage agreement.

Spanish lenders, including Barclays, Santander and La Caixa, argued that if they were to pay each of the potential claims from the beginning of the mortgage agreement, it would cost more than €4 billion – an amount that would cripple the fragile banking sector. Nonetheless, in December, the European Court of Justice ruled Spanish mortgage floor claims should be paid in full.

Conscious that there is a potential for 2.5 million Spanish mortgage floor claims, the government quickly agreed the terms of a decree that would create a process for property owners seeking compensation. On Friday, Spain´s Economy Minister – Luis de Guindos – told a press conference that banks had been given three months to contact each customer affected by the mortgage floor clause and make an offer of settlement.

If an offer is inappropriate to the amount overcharged, property owners have the right to contest the offer. If no agreement can be found within three months, property owners have the right to take their Spanish mortgage floor claims to court. The government has advised property owners to seek legal advice before accepting or declining settlement of the Spanish mortgage floor claims.

Some lenders have already said they will not fully comply with the decree. Banco Sabadell and BBVA have already stated that, in cases where the mortgage floor clause is clearly indicated in the agreement, or in cases where the mortgage agreement was signed by a legal or financial professional, they will not consider themselves liable for Spanish mortgage floor claims. There is also the likelihood that many lenders will make inappropriate offers of settlement to reduce their liabilities.

£100 Million Added to Fund to Pay RBS PPI Refund Compensation

Monday, 3rd November, 2014

An extra £100 million has been allocated to the fund to pay RBS PPI refund compensation after “higher than expected reactive complaint volumes”.

The announcement that an extra £100 million had been added to the existing fund to pay RBS PPI refund compensation came in the banking group´s interim financial statement for the third quarter. The extra provision to pay RBS PPI refund compensation increases the banking group´s total PPI provision to £3.3 billion.

The interim financial statement also revealed that, although much of the group´s liability for the mis-selling of PPI was inherited when the NatWest Bank was integrated into the group, RBS received a fine of £2.8 million for poor complaint handling from the Financial Conduct Authority (FCA).

In a separate report compiled by the Financial Conduct Authority, it was revealed that 31% of decisions relating to claims for RBS PPI refund compensation failed “to demonstrate a fair outcome for consumers”, while 62% of PPI-related complaints to the banking group were not dealt with in an appropriate timeframe.

Despite increasing its provision for RBS PPI refund compensation by £100 million, the RBS Group announced third quarter profits of £1.27 billion, compared to a loss of £634 million for the corresponding quarter in 2013. This is the first time that the banking group has recorded a profit in three consecutive quarters since it was bailed out by the taxpayer during the 2008 financial crisis.

However the news of a third straight profitable quarter also contained a warning to shareholders. The company commented that “ongoing conduct and regulatory investigations and litigation continue to present challenges and are expected to be a material drag on both earnings and capital generation over the coming quarters.”

The “ongoing conduct and regulatory investigations” mentioned in the warning are likely to relate to the thousands of appeals still waiting to be investigated by the Financial Services Ombudsman – the independent arbitrator to whom PPI claims are referred when customers are dissatisfied with the outcome.

The Financial Services Ombudsman has reported that approximately 70% of the claims for RBS PPI refund compensation that are referred to the service are upheld in the customer´s favour. This would indicate that the fund to pay RBS PPI refund compensation is likely to increase further in the future.


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