Expats who have overpaid billions of euros in mortgage interest to banks in Spain have lost their chance of refunds after Europe’s leading court found against them.
British expats are among the thousands of mortgage customers who suffered financially when the Spanish government set a time limit on claims.
A legal challenge through the courts in Spain reached the European Courts of Justice, where judges agreed the time limit was legal.
The limit set a cut off for compensation after 2013.
The controversial legal case has already seen the Spanish Supreme Court rule in May 20143 in favour of borrowers who saw their mortgages set at rates higher than benchmark rates.
Judges rule for borrowers
In April, another court in Madrid demanded 40 lenders should refund borrower for mortgage interest overpayments made after May 2013.
The EU court decision means that banks do not have to compensate overcharged borrowers for the billions they were not required to pay before May 2013.
The ruling will cost Spain’s banks at least 12 billion euros over the next four years.
The figure includes 4.5 billion euros in compensation and refunds, plus another 6.5 billion in expected earnings that are now lost.
Nevertheless, investors saw the result as a good sign as a cap is now placed on what were uncertain bank losses that could have cost billions more stretching back before May 2013.
Decision limits liabilities for banks
Share prices rose on the decision, and some unsympathetic banks issued statements strongly doubting whether they should have to pay any compensation because they had done no wrong.
One doubt is whether the courts have limited the lender liabilities to stop the banks going to the wall under massive compensation claims.
The long-running case has also undermined consumer confidence in the banks, as customers are taking up less borrowing even though the costs are cheaper than they have been for a long time.
Expats have also had their own run ins with the banks who have foreclosed on mortgages, had hidden loans on properties and generally acted in their own interests rather than those of their customers.