A full reimbursement for clients who had ‘mortgage floors’ could cost banks billions in back payments

WSJ-

Spanish lenders might have to pay billions of euros back to borrowers after the European Union’s top court Wednesday ruled against the banks in a disputeover variable-rate mortgages.

The European Court of Justice ruled that borrowers in Spain are entitled to be fully reimbursed for excess interest payments on variable-rate mortgages. The ruling follows a 2013 decision by Spain’s top court that outlawed so-called “mortgage floors,” deeming them unfair to clients because banks didn’t clearly explain to borrowers the economic and legal consequences of having a downward limit on how far interest payments could fall.

However, the Spanish court ruling said banks had to stop enforcing the mortgage floors but didn’t have to reimburse clients for any excess interest payments before the date of the 2013 ruling. A full reimbursement, the judges wrote at the time, would have meant “a risk of serious disruption” to Spain’s economy.

[WALL STREET JOURNAL]