Greece's Supreme Court caps interest on protected 'red loans', slashing monthly payments for up to 350,000 borrowers
The plenary session of the Areios Pagos published its decision ruling that interest on loans protected under the Katselis Law must be calculated on the court-ordered monthly instalment, not the total outstanding capital, a move expected to reduce payments by hundreds of euros.
The ruling
Greece's Supreme Court (Areios Pagos) has published a long-awaited decision that fundamentally changes the calculation of interest on 'red loans' protected under Law 3869/2010, known as the Katselis Law. The plenary session ruled by a majority of 35 to 12 that interest must be calculated solely on the monthly instalment set by the court, rather than on the total outstanding debt. The full text of the ruling is expected to be posted on the court's website within the day.
The decision of the Plenary of the Supreme Court, according to which the calculation of interest due on red loans included in the 'Katselis Law' will be made on the monthly instalment, and not on the total amount owed, is a step in the right direction and is positive for approximately 350,000 borrowers who were excessively burdened.
Who is affected
The decision directly affects borrowers who have secured a court ruling under the Katselis Law, a framework designed to protect primary residences. Estimates of the number of affected borrowers vary slightly across reports: some sources cite approximately 350,000 borrowers, while others reference more than 200,000. The total value of loans impacted is estimated to exceed 12 billion euros. The ruling is binding on lower courts handling similar pending cases.
Financial impact on borrowers
Until now, banks and loan servicers (funds) had been calculating interest on the total remaining capital, a practice that significantly inflated monthly payments. Under the new interpretation, interest will accrue only on the monthly instalment, in line with the law's protective purpose. Reports indicate that monthly payments could drop by more than 200 euros in some cases, with one source citing a reduction of up to 420 euros. Borrowers will also receive updated payment schedules reflecting the lower amounts.
Refunds and retroactivity
Banks and servicers are now required not only to adjust future interest calculations but also to offset amounts they have already collected through the previous, more expensive method. This will be done via a set-off against the remaining loan balance. The court did not rule on full retroactivity for past payments; instead, it indicated that borrowers who wish to reclaim overpaid amounts from previous years will need to pursue separate legal action, such as lawsuits for unjust enrichment.
Political reaction
The main opposition party, SYRIZA-PS, welcomed the ruling, stating it aligns with the party's long-standing position in favour of borrower protection. The party criticised the government of Kyriakos Mitsotakis for introducing a bankruptcy law that it claims leads to home losses, and called for greater transparency and oversight of funds and servicers, referencing a recent IMF report that highlighted gaps in supervision.
