ECJ: Can ‘Floor Clauses’ Be Challenged by Collective Action?

Jul 19, 2024 Benn-Ibler Rechtsanwälte

Minimum interest clauses (‘floor clauses`) can be fully reviewed by means of a class action, the European Court of Justice (ECJ) has stated in a preliminary ruling requested by a Spanish court.

A Spanish consumer protection organisation has filed a collective action lawsuit against 101 financial institutions operating in Spain. The aim is to prohibit the use of floor clauses and to recover sums paid under such clauses. Following appeals in the national media, 820 consumers joined the action.

Floor clauses are a standard feature of mortgage loan agreements where the interest rate is variable. They set a minimum interest rate below which the variable interest rate may not fall, even if the reference interest rate falls below this minimum interest rate.

The Spanish Supreme Court, considering the floor clause, had doubts about the admissibility of a collective action, especially in view of the large number of consumers involved. The court was concerned that such an action would not be suitable for assessing the transparency of the floor clauses to determine whether they were abusive. In the court’s view, it is difficult to apply the criterion of ‘average consumer’ in the context of a transparency review, since floor clauses are aimed at different specific groups of consumers.

The ECJ ruled:

There is nothing in the Directive to suggest that a judicial review of transparency in the context of a collective action should be excluded. The review must simply be adapted to the specific features of collective redress and focus on the businesses’ standard practices vis-à-vis the average consumer.

According to the ECJ, the two conditions for bringing a collective action against several sellers and suppliers are met in this case:

(a) The action is directed against businesses in the same economic sector, in this case credit institutions, and (b) the floor clauses are similar. The fact that the contracts in which the clauses are contained were concluded at different times or in application of different rules is not in itself sufficient to exclude that similarity.

ECJ C-450/22 (4 July 2024)