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Report: Bankia pays back €170M to customers hit by mortgage floors

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Report: Bankia pays back €170M to customers hit by mortgage floors

Bankia SA has paid back almost €170 million to 34,000 customers affected by controversial mortgage floor clause practices, the Spanish lender said May 26.

The bank has been aiming for quick settlements with customers affected by controversial mortgage practices to avoid costly legal fees and to reduce its exposure to ongoing legal claims, following Spain's passage of a royal decree in January obliging lenders to settle with borrowers within the next three months.

The decree followed a December 2016 European Court of Justice ruling that Spanish banks must repay the totality of customer losses incurred because of floor clauses on mortgages.

The floors set a lower bound on the interest rate applicable to a mortgage, but customers have claimed that they were not properly advised of the caps and that their imposition cost them some of the benefits of prevailing low interest rates.

Bankia provisioned €65 million related to the clauses in the fourth quarter of 2016.