Types of abusive clauses in mortgages: what they are and how to eliminate them

mortgage

“Unfair terms” are one of the most controversial issues in recent years. Currently, they have been declared void by the courts as it is considered that some banks added them to their mortgages in a “not very transparent” manner without the knowledge of users, causing serious harm to consumers.

If you are thinking of buying a house, you should find out about how to request a mortgage and about questions such as how much money the bank will lend you , what type of mortgage you are interested in or the interest rates that each bank offers you.

From Sky Marketing we also recommend that you analyze in detail all the commissions associated with each loan. These commissions should not be confused with abusive clauses, since the latter are considered illegal.

Below we explain what they are and what are the different types of abusive mortgage clauses.

What is an abusive clause?

According to Article 82 of Royal Legislative Decree 1/2007, abusive clauses are considered “all those stipulations not negotiated individually and all those practices not expressly consented to that, contrary to the requirements of good faith, cause, to the detriment of the consumer and user, an important imbalance of the rights and obligations of the parties that derive from the contract”.

In the case of mortgages, the conditions imposed unilaterally by the banks are considered abusive, without clarification to the consumer.

In general, these types of clauses are characterized by being non-negotiable and by causing serious harm to users, placing them in a vulnerable position vis-à-vis the bank with which they have signed a mortgage.

What are the main unfair terms of a mortgage?

During the last ten years, several of the usual clauses in many mortgages have been declared abusive by the Spanish and European courts. Among the most important, the following stand out:

Floor clause

Possibly, it is the most known abusive clause for being one of the worst consequences for users.

The floor clause is a minimum interest that some banks incorporated into their variable mortgages whose interests vary monthly based on a reference value (generally the IRPH or the Euribor).

The floor clause was applied independently of the periodic reviews of these references, that is, the mortgaged were obliged to always pay minimum interest and could never benefit from the Euribor decreases.

The main problem with the floor clause is that, generally, the client did not know what it meant because no one from the bank explained it to him before signing his mortgage.

Mortgage constitution expenses

This is another of the most common types of abusive clauses.

For years, banks forced their clients to assume all mortgage deed expenses, including notary and registry fees, management fees, appraisals and taxes such as the IAJD.

In 2015, the Supreme Court declared that these expenses were abusive because banks also need the mortgage deed and, therefore, must assume a part of its cost.

After the entry into force of the new Mortgage Law, the mortgage constitution expenses are divided: the client pays the appraisal, the copy of the deed, the simple note and the damage insurance of the mortgaged property, while the bank assumes Notary fees, mortgage registration in the Property Registry and management costs.

Advanced expiration date

It is one of the most damaging abusive clauses for customers.

In principle, this mechanism serves to avoid delays in the payment of mortgages. However, some banks activated this clause with a single delay in the payment of a monthly installment, giving the entity powers to terminate the contract or, failing that, increase the installment of the mortgaged claiming ” default interest “.

Although this clause has not been totally annulled, the new Mortgage Law imposes clear limits on it: it only applies after repeated non-payment (non-payment of 3% of the capital granted or 12 monthly payments in the first part of the loan or 7% of the capital granted or a total of 15 installments in the second part of the mortgage) and when the interest applied by the early maturity clause is a maximum of three points above the mortgage interest at the time of signing.

Other types of abusive mortgage clauses

IRPH

Theoretically, the application of the alternative mortgage index to Euribor is not an abusive clause, although its inclusion in contracts in recent years has been not very transparent.

The IRPH Index or Reference Index of Mortgage Loans is one of the official indices published by the Bank of Spain as a reference to calculate the interest on mortgage loans.

The problem is that IRPH was very easy to manipulate because it was made with data provided by the financial institutions themselves, so if the banks did not update said data (consciously or not), the lower interest rates were not applied.

At the end of 2018, the European Commission issued a non-binding report assuring that the IRPH was contrary to European legislation. Currently, interest overpaid for using this index as a reference can be claimed if the clause in question is deemed not to have a “clear and understandable wording”.

Multi-currency mortgages

Multi-currency mortgages are loans granted in foreign currencies to mark the interest of the installments, which allows you to take advantage of the fluctuations in money prices to pay less.

So why have they considered an abusive practice for consumers?

Because they are always calculated at the current price of the currency and under favorable conditions. However, since the fluctuation of the value of the currency is unlimited and the money is returned in the same currency that the loan was requested, the client assumes, usually without knowing it, a practically infinite borrowing capacity.

In addition, these mortgages have quite high opening costs and compensation clauses for currency exchange, something about which customers were not usually informed.

How to remove or claim abusive mortgage terms

Currently, almost all abusive clauses can be claimed or eliminated from mortgage contracts, although it is convenient to know what the law says in this regard and try to negotiate with the bank individually. Many of them are automatically deleted, and in others you must request it expressly.

Regarding claims and returns, the money overpaid for the floor clause can be claimed from the bank or through the courts with Tajarart properties.

In the case of the costs of setting up the mortgage, a refund can be requested as long as the distribution of the costs is not carried out correctly or is not balanced, although 100% of the amount paid will never be recovered.

In multi-currency mortgages, the Supreme Court declared their nullity as long as the risks were not explained to the borrowers. If so, you can request a currency exchange and negotiate new conditions for your mortgage at no extra cost.

The deadlines to claim, in all cases, depending on whether the clause has been considered null or absolute by right, or if the clause is null due to error or vice of consent. In the first case, there is no deadline to claim; in the second, there is a period of four years from the signing of the mortgage to file claims.

Regarding where to claim abusive clauses through the courts, you must go to the court of the first instance or the court specialized in these clauses in your province.

 

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