Spanish Banks Ordered to Repay Billions to Mortgage Borrowers

clausula-suelo     
CLAUSULA SUELO

Spain’s banking sector was hammered on Wednesday after the European Court of Justice ruled that lenders will need to reimburse mortgage customers who were overcharged on interest payments.

The Spanish Supreme Court had previously ruled that the refunds should only apply from May 2013, however the ECJ has now ruled that all overcharged interest should be repaid, which in most cases will be from around 2009 when the Euribor began to fall.

The Court said lenders had incorrectly applied a ‘floor’ (Clausula Suelo) to mortgage rates, even as inter-banking lending costs fell to a record low of nearly zero percent in the wake of policy easing from the European Central Bank. The ‘floor’, which was ruled illegal by Spain’s highest court in 2013, essentially meant that retail customers paid higher-than-necessary rates on their mortgages, potentially amounting to billions of euros, that lenders will now need to reimburse as a result of the ECJ ruling.

“The situation of unfairness must have the effect of restoring the consumer to the situation that consumer(s) would have been in if that term had not existed,” the ECJ said “Consequently, the finding that ‘floor clauses’ are unfair must allow the restitution of advantages wrongly obtained by the seller or supplier to the consumer’s detriment.”

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