Spanish Supreme Court annuls abusive reverse mortgage interest clause

The Spanish Supreme Court has ruled that a reverse mortgage contract remains valid even if its interest clause is declared abusive. Under this ruling, the financial institution is prohibited from charging the interest specified in the annulled clause and is required to return any interest amounts already collected.

The case originated from a 2010 contract between a couple in Valladolid and Caja Vital Kutxa (now Kutxabank). Following the death of the couple, their heirs challenged the contract terms. The dispute centered on a clause that set a 6.50% annual interest rate described as ‘simple interest,’ yet monthly generated interest was added to the outstanding debt, creating a compounding effect known as anatocism.

The court determined that the contract failed to clearly communicate the real economic consequences and the actual impact of this compounding mechanism to the clients.