Are agreements between the Bank and Consumer on Floor Clauses valid?
Very recently, on 15 June 2018, the Supreme Court issued a new ruling on a case relating to mortgage deeds novation modifying the floor clause through an agreement between the client and the financial institution. This judgment declares the nullity of the Floor Clause and the novation carried out subsequently through the signing of the agreement proposed by the bank to the client.
What does the case decide?
The case raises, as a matter of substance, the application of transparency control to a mortgage loan that included the so-called floor clause and that was subsequently the object of modifying novation.
As stated in the judgment, at no time in the contractual phases that led to the realization of the aforementioned mortgage loan contract and its subsequent modification, did the bank fully inform the client about the effects of the floor clause which would have allowed the client to make his/her decision with full knowledge of the economic and legal burden that the said clause had.
What does transparency imply?
According to Case Law of both the Supreme Court and the CJEU, the duty of transparency implies that the consumer has, before the conclusion of the contract, all the understandable information about the conditions contracted and the consequences of these clauses in the execution of the contract concluded.
What are adequate transparency levels?
According to the Supreme Court in that ruling, the information deficit is not replaced by the mere reading of the deed, or by the grammatical clarity that may result from the wording of the floor clause, which although it serves to overcome the control of incorporation does not determine, alone, in the absence of this additional information, that said floor clause also exceeds the transparency control.
If you signed an agreement with the Bank, please feel free to contact us so we can advise you on its validity