There are many Spanish banks that “force” their clients to take out life insurance or similar, in order to grant them a mortgage loan. Forcing the borrower (the client) to take out insurance with the bank, or with companies in the same group. Depending on how it is done, it may not be permitted by law. In these cases, there is a possibility of requesting the nullity of the insurance imposed by the bank.
Legal justification.
Article 12 of the European Directive 2014/17/EU states that tied sales are prohibited, unless they result in an advantage or benefit for the consumer.
This limitation is also reflected in Spanish legislation, art. 17 of Law 5/2019, regulating real estate credit agreements, which is titled “Practice of linked and combined sales”.
Likewise, the information provided is sometimes insufficient. And the clauses of the product are not very transparent. This would also go against Spanish and European legislation on consumers.
Illegal banking practices.
Some Spanish banks not only force customers to take out life insurance or payment protection insurance (which, in principle, would be prohibited). They also charge the customer for the policy in one go, and in advance. In addition to being a tied sale, this entails additional costs for the consumer. Because the cost of the insurance is included in the loan capital. And, therefore, it accrues interest, etc.
If the bank makes the granting of the loan conditional on taking out this insurance with them, this could be an illegal practice.
It should also be examined whether the bank’s actions were transparent or not. If the additional cost involved was correctly explained to the client. The possibility of contracting with other insurance companies. Whether the customer was informed of the possibility of paying monthly instalments, instead of a one-off advance payment, etc.
Thus, sometimes customers are deprived of the possibility of going to other entities and they are forced to take out the bank’s insurance or companies of their corporate group.
What do the Spanish Courts say.
There are different rulings from the different Provincial Courts in Spain. The Spanish Supreme Court has not yet ruled.
Some have stated that the imposition of life insurance contracts with the bank itself should be considered abusive and null and void. But each case is different and must be studied individually. It is essential to check whether:
. – There is evidence that the bank imposed the contracting of the insurance with the entity itself.
. – The bank informed about the possibility of contracting with other entities, conditions of the product, etc.
. -They informed of the different types of insurance policies, their costs, etc.
. – A single and initial payment of part of the loan principal was imposed and if the client was informed that this meant an increase in the cost, etc.
. -The cost of the product is abusive or is it a normal market price.
Consequences in case of nullity.
The nullity of these products could entitle the consumer to ask the bank to return the premium paid. And even the interest thereon.
Conclusion.
If your bank forced you to take out insurance with them, did not inform you about the product, different options, etc. you could claim the nullity of the contract and the refund of what you paid. For expert legal advice on the insurance imposed by the bank, do not hesitate to contact us.
The information provided in this article is not intended as legal advice, but merely conveys information related to legal issues.
Carlos Baos (Lawyer)
White & Baos.
Tel: +34 966 426 185
E-mail: info@white-baos.com
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