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EU says Spanish banks should repay clients in mortgage spat - El Pais

MADRID (Reuters) - The European Commission believes the Spanish banks asked to remove minimum interest rate clauses from mortgages should now repay customers in full, El Pais newspaper reported on Monday, citing a report sent to Europe's top court.

The opinion, sent in response to a query from the European Court of Justice, could be costly for Spanish banks if applied. Several lenders have already taken a profit hit from having to remove such clauses from mortgages.

Spain's Supreme Court ruled in May 2013 that so-called floors, which stop interest rates from dropping below a certain level, were invalid if they had not been presented clearly to customers, who were not benefiting from historically low rates.

BBVA and smaller lenders Abanca and Cajamar were targeted by the ruling and the three banks removed the clauses after the ruling against them.

The Commission believes, however, that the banks should go further and repay customers what they are owed in interest payments over the whole life of the loan, and not just since May 2013, El Pais said.

The European Commission and the European Court of Justice did not respond to requests for comment.

BBVA, Cajamar and Abanca had no immediate comment.

The Commission's opinion is not binding, and made no direct reference to BBVA, Cajamar and Abanca, El Pais said.

It could still have consequences for Spain's banks, however, at a time when they are struggling to ramp up revenues after a deep recession.

The "mortgage floors" have been highly unpopular in Spain, amid accusations from consumers that they were not informed transparently about the implications of the clauses.

Last week Caixabank said it had eliminated most of its mortgage floor clauses at a cost of about 220 million euros ($243 million) on an annualised basis.

(Reporting by Sarah White and Robert Hetz; editing by David Clarke)