The Supreme Court has established a new criteria by which the term to sue a bank for possible abuses does not begin to count until the signed contract ends.


Great news for those harmed by a product abusively placed by a bank and who thought they could no longer sue. The Supreme Court has established a new criterion according to which the term to do so, four years according to the Civil Code, only begins when the contract signed with the bank is terminated, and not from the moment of signature or from the moment in which the client notices the abuse. It did so based on a mortgage swaps ruling, but the law can be extended to many other products, such as preferences, subordinated debt, land clauses or convertible bonds.

“For the purposes of the annulling actions due to mistakes, ‘swap’ contract completions must be understood to have occurred when the contract was exhausted, terminated” states the ruling. “For ‘swap’ contracts or ‘mortgage coverage’ the contract is not completed until the contractual relationships is exhausted or terminated, as this is when the performance of benefits by both parties and the effective production of the economic consequences of the contract occurs”, he adds.

This doctrine has traditionally belonged to the High Court, but a ruling from 2015 opened the door to a more favorable interpretation that defended financial institutions based on the instruction that more than four years would have passed. The key to this is the moment in which that period begins, which the bank argues should be when the contract is signed, or at the latest, when the customer realizes that what he signed wasn’t what he expected.


Giving warning of the abuse does not mark the term’s beginning

The new sentence, dated February 19th and whose speaker is Mª Angeles Parra, dismantles this thesis: “The doctrine resolved in this room does not involve acting before the contract’s completion, due to the fact that the customer suffering from the mistake needs to know about it, which would go against the wording of Article 1301.IV CC, which states that the time to act begins when the contract is completed.”

That is to say, to establish the beginning of the four-year term to claim, the moment of the contract’s termination, as signed with the bank, must be taken as the initial moment, regardless of whether the customer noticed the abuse before. This doctrine can be easily extrapolated into other contracts with a defined due date, such as a mortgages with a floor clause: interpreting it literally, even if a mortgaged person has realized long ago that his monthly letter didn’t reflect the Euribor decreases, he would be entitled to make a claim up to four years after it expires. Other legal sources maintain that it doesn’t apply to floor clauses because, when they are abusive, “their nullity is radical, fully lawful and therefore, this nullity, nor the action to exercise it in the courts, isn’t subject to a prescription period.”


What if the contract doesn’t expire?

This is more complicated when we deal with other banking products that have no expiration date, such as the acquisition of securities or shares. When would this contract end? So far, the doctrine considers this date as the moment of amortization of the securities, their conversion or the operation that destroyed their value (such as the reduction/capital increase that the FROB made in Bankia).

For the rest, the Supreme Court’s ruling reiterates its doctrine that contracts are nulled when the bank doesn’t explain the product’s characteristics in detail, especially its risks, including scenarios simulations. Whether the customer is a professional or a company doesn’t serve as an excuse for this obligation (in this ruling, it was a real estate developer who requested a credit of six million from Santander) as long as they do not work specifically in the financial business.

This is great news as you can now reclaim the overpaid mortgage interest caused by the floor clause.