Spain's banks face pain as EU court requires mortgage restitution

Madrid (dpa) - Spanish banks need to come up with billions in repayment after the European Court of Justice ruled Wednesday that a key element of many mortgage contracts was unfair to consumers.At issue is the use of "floor clauses," which require loan takers to continue to pay interest at a certain rate, even if prevailing interest rates fall significantly lower.The court ruled that Spanish banks had not sufficiently explained the rules of the loans to consumers and demanded they make restitution."Unfair terms must not bind consumers as provided for under the national law of the member states," wrote the court in its decision.The ruling means that Spanish banks, which have already repaid 2.5 billion euros (2.6 billion dollars) to irate customers might need to come up with 4 billion more.The clause in the contract had already been ruled illegal by a Spanish court in 2013. However, the European court went further, arguing that restitution was required even in cases where the money was received before the Spanish ruling.According to local media, the ruling had not been expected and left investors scrambling to ditch shares in Spanish banks. Banco Popular was particularly badly hit. Its share price fell by 5.8 per cent. It said it has to find an additional 344 million euros due to the ruling.