Tenerife Court Rules Bank Must Refund Employee Over 'Floor Clause' Mortgage Transparency Failure

The Provincial Court of Santa Cruz de Tenerife has issued a landmark ruling protecting bank customers, rejecting an appeal from a financial institution that tried to uphold a "floor clause" in a mortgage. The bank had argued that because the borrower was one of their own employees, they were exempt from standard transparency and information requirements.

The court disagreed, ruling that being a bank employee does not automatically mean a person has expert knowledge of complex financial products. The judges stated that an employment relationship does not waive a bank’s duty to be transparent. In this case, the bank failed to prove that the borrower had specific expertise in mortgages or that they had clearly explained the financial impact of the clause before the contract was signed.

This decision aligns with established rulings from the Supreme Court and the Court of Justice of the European Union, which require a "double control of transparency." The court emphasized that it is not enough for a clause to be readable or included in a deed; the customer must be able to understand how the interest rate limit would affect them if market rates dropped. The court noted that providing clear information before a contract is signed is essential for customers to compare offers and understand risks—a standard the bank failed to meet.

Additionally, the court dismissed the bank’s claims that it had already returned the money and voluntarily removed the clause, finding no evidence to support these assertions. The original ruling from a La Laguna court stands: the bank must recalculate the loan’s payment schedule and refund the money collected through the floor clause.

Ultimately, the Tenerife court has reaffirmed that regardless of a customer’s professional background, the responsibility for proving transparency lies entirely with the bank.