MADRID, Jan 18 (Reuters) - The Spanish government is to give banks three months to reach agreements with customers who were sold mortgages with an interest rate floor or face a wave of legal claims as well as a potential multi-billion euro hit.
Economy Minister Luis de Guindos, announcing the plans on Wednesday, said the settlement proceedings would be free of charge for customers.
These home loans had an interest rate that could not fall below a certain level, which meant customers missed out when rates dropped below that floor.
In December, the European Court of Justice said the banks must repay customers more than 4 billion euros ($4.27 billion) in relation to these mortgages, overturning a Spanish court ruling that had put a cap on what banks should pay.
About 1.5 million customers who were sold those mortgages are now entitled to seek their money back in the courts, potentially creating a new legal headache for Spanish banks which are recovering from a crisis that has cut their numbers from around 50 four years ago to a dozen now.
The banks are expected to compensate customers for what they lost. But most banks want to avoid making a cash payment upfront and instead may offer an interest cut on the mortgages to spread the cost over a longer period, banking industry sources said.
Under the scheme being discussed by the centre-right government and the opposition socialists, it would be up to the bank to get in touch with customers and offer them a settlement.
If after three months no deal has been reached, customers would then still be able to file a complaint.
The new regulation is due to be approved on Friday.
$1 = 0.9377 euros Reporting By Jesus Aguado; Editing by Julien Toyer and Jane Merriman