Supreme Court strengthens consumer protection in reverse mortgages over lack of transparency.

1. STS 1190/2026, of 17 July 2026 (Kutxabank, S.A. v. Mr Romeo and Mrs Eloisa)

Chronological background: on 7 August 2007, Mr Romeo and Mrs Eloisa entered into a credit account agreement secured by a mortgage, under the reverse mortgage modality, with Kutxabank (then Caja de Ahorros y Monte de Piedad de Guipúzcoa y San Sebastián), with a credit limit of 358,720 euros and monthly drawdowns of 650 euros. The third clause set an annual interest rate of 5% under a simple interest formula during the drawdown period. The borrowers filed suit in 2018, almost eleven years later, seeking the annulment of that clause for lack of transparency and its unfair nature, alleging that the bank was in fact applying compound interest, capitalising the interest accrued on the drawn balance without having given notice of this.

The Court of First Instance No. 8 of Donostia (6 February 2020) upheld the claim on the grounds of error in consent. The Provincial Court of Gipuzkoa (10 June 2021) confirmed the annulment of the contract, but on different grounds: it held that the third clause did not pass the transparency control, since it did not explain that interest would be capitalised on the drawn balance plus the interest already accrued, creating an appearance of a lower cost than the actual one; and that this lack of transparency, together with the economic imbalance caused (the interest charged came to represent close to half of the credit limit), rendered it unfair. As this was the clause governing the customer's essential obligation (the price), it ordered the total annulment of the contract.

Kutxabank filed a cassation appeal arguing that the clause was clear and that its client, a practising lawyer, was able to understand how the product worked.

Merits and Supreme Court ruling: the Supreme Court dismisses the cassation appeal. It reasons that, since this was a contract predating Law 41/2007 and Order EHA/2899/2011 (meaning the FIPRE/FIPER information sheets were not required), the entity failed to prove that it had provided sufficient written or verbal pre-contractual information, had carried out scenario simulations, or had assessed the borrowers' personal situation or the alternatives available on the market. Applying its settled case law on the controls of incorporation and transparency (Articles 5 and 7 of the Spanish General Contract Terms Act, Article 4.2 of Directive 93/13/EEC), it concludes that the third clause did not provide minimum information on the capitalisation of interest, which prevented the consumers from knowing the real cost of the product and comparing it with other alternatives, creating a serious imbalance contrary to good faith.

Consequently, it confirms the total annulment of the reverse mortgage contract, with mutual restitution of performance, and orders Kutxabank to pay the costs of the appeal.

2. STS 1317/2026, of 24 July 2026 (heirs of Mr Romualdo and Mrs Valentina v. Kutxabank, S.A.)

Chronological background: on 30 November 2010, Mr Romualdo and Mrs Valentina entered into a reverse mortgage contract with Kutxabank, with a fixed interest rate of 6.50% per annum during the drawdown period, likewise calculated using a simple interest formula. The borrowers died in 2016 and 2019, and their children, now as heirs, filed suit in 2019 seeking, as their main claim, the absolute nullity of the contract for lack of consent by the heirs themselves and, in the alternative, on the grounds of a defect in their parents' consent or the unfairness of the clauses, in particular due to the undisclosed capitalisation of interest (anatocism).

The Court of First Instance No. 2 of Valladolid (16 March 2020) upheld only the alternative claim relating to the annulment of the default interest clause (following the entity's acquiescence), dismissing the rest: it held that the contract was clear, that the parents had been informed by a bank employee, and that there was no unfair imbalance. The Provincial Court of Valladolid (10 May 2021) partially upheld the heirs' appeal, further declaring the partial annulment of the third clause insofar as it allowed the remunerative interest to itself generate further interest (anatocism), for lack of transparency in that this mechanism was neither explained nor illustrated, although it upheld the validity of the fixed 6.50% rate.

The heirs filed an extraordinary appeal for procedural infringement and a cassation appeal.

Merits and Supreme Court ruling: the Supreme Court wholly dismisses the appeal for procedural infringement. It rejects the argument that the children should have given their consent during their parents' lifetime, since they are not parties to the reverse mortgage contract and hold no rights until the death and acceptance of the inheritance; nor does it find any error in the parents' consent, given that the product was not especially complex, they had been informed, they had a high level of education, and they obtained a clear and planned economic benefit (cancellation of a prior loan, an additional monthly income and extra liquidity).

However, it partially upholds the cassation appeal on the point relating to the unfairness of the interest clause. The Supreme Court criticises the Provincial Court for declaring only the partial annulment of the third clause (retaining the fixed 6.50% rate while removing only the capitalisation), as this infringes the case law of the Court of Justice of the European Union, which prohibits national courts from supplementing or moderating the content of an unfair term (case law contrary to the so-called "blue pencil test"), in accordance with the CJEU judgments of 26 March 2019 (C-70/17 and C-179/17), of 12 December 2024 (C-300/23) and of 20 March 2025 (C-365/23), among others. Since the clause lacked transparency as to its actual method of calculation, its annulment must be total, and the agreed interest rate cannot partially survive. The Court therefore quashes the Provincial Court's judgment and declares the complete annulment of the third clause relating to remunerative interest, which is deemed never to have been included in its entirety, with the resulting obligation for Kutxabank to reimburse the heirs for the amounts charged under that heading, plus statutory interest, and orders the financial entity to pay the first-instance costs.

Joint conclusion

Both judgments, issued by the same Chamber and with the same rapporteur in the same month of July 2026, address remunerative interest clauses in reverse mortgages predating the specific regulation of this product. In the first (1190/2026), the lack of transparency regarding the capitalisation of interest led to the total annulment of the contract, since it affected the borrower's essential obligation with no possibility of survival. In the second (1317/2026), the Supreme Court reinforces and refines that same doctrine: when an interest clause lacks transparency because it fails to disclose the capitalisation (anatocism) that will be applied, its annulment as unfair must be total and cannot be limited or "trimmed" to preserve the agreed interest rate, in strict application of European case law that bars judicial supplementation of unfair terms.