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Spanish Banks Face Risk of Penalties for Unfair Mortgages

  • EU court’s binding ruling expected in next four to six months
  • Case questions if clients were misled over index-linked loans
Sunlight hits residential apartments in the Sant Antonio neighborhood of Barcelona, Spain.

Sunlight hits residential apartments in the Sant Antonio neighborhood of Barcelona, Spain.

Photographer: Angel Garcia/Bloomberg
Updated on

Spanish banks risk having to pay billions of euros in compensation for the way they sold mortgages linked to an index published by the Bank of Spain, according to an advisory opinion from the European Union’s top court.

An adviser to the EU Court of Justice in Luxembourg said the bloc’s consumer protection rules apply to the way banks explain how interest rates are fixed in mortgage contracts. At issue is whether lenders misled customers by failing to provide sufficient information when selling loans tied to the central bank’s Loan Reference Index, or IRPH.