Spanish consumers have won a landmark victory after a Madrid commercial court ruled that mortgages with fixed minimum payments, known as 'cláusula suelo', were null and void due to a lack of transparency in their sale. The ruling affects some 40 banks, including Barclays and Santander, which faces a potential bill of up to €5bn (£4bn).
The class action lawsuit, brought on behalf of 15,000 mortgage holders by consumer group ADICAE, targeted banks that sold these minimum-rate mortgages during the property boom from 1997 to 2007. The clauses set a floor below which monthly payments could not fall, preventing borrowers from benefiting when interest rates dropped after the bubble burst.
Spain's Supreme Court had previously ruled similar mortgages by BBVA, Cajamar and NCG as abusive in May 2013. Thursday's decision goes further, ordering the banks to repay amounts improperly charged since that date. However, the European Court in Strasbourg is expected to rule on 26 April whether liability should extend further back to the original signing of the mortgages.
The ruling does not ban such mortgages outright but declares them null due to banks' failure to adequately inform customers of the terms. ADICAE president Manuel Pardos praised the judge for her bravery, noting that many affected homeowners faced eviction during the recession, peaking at 500 a day in 2012.
Banks have 20 days to appeal the decision. Many had already made provisions for a potential payout, anticipating the outcome. Santander UK, a subsidiary of Banco Santander, is among those affected.
