THERE were many banks that when granting a mortgage loan made it a condition that borrowers take out a life insurance policy to cover the loan instalments in case of death.
In a number of cases, such insurance was paid in full (in a single premium) at the same time as the mortgage loan was signed with the insurance costs being paid from the mortgage loan.
Although in principle it cannot be claimed that all of these linked insurances are abusive or illegal, the way in which it was marketed, its imposition and lack of information, could allow the clients to claim that it be declared null and void and ask for a refund of the money paid .
Even the General Direction of Insurances in Spain, has pointed out that the imposition by insurers of a single premium insurance is inadequate and contrary to good practice and use in the private insurance sector.
Some Spanish banks defend their position by saying that they are not responsible because they are not the insurance company issuing the contracts, but the truth is that in many cases, the insurance companies either belong to the bank group or the bank acted as their agent or seller.
The reasons why these contracts, or their cost, can be understood as abusive and non-transparent, is that the information normally provided by the bank is very poor, didn’t advise clients of other insurance possibilities, didn’t give information about possible cancelation and there is no possibility of negotiation.
In this sense several Provincial Courts have confirmed their opinions as shown below;
.-Judgment of the Provincial Court of Ourense number 417/2019, the court understands that the expenses and conditions of the life insurance that is linked to the mortgage loan, do not appear in the binding offer, nor in the mortgage deed itself, nor are included in calculation of the total cost of the loan.
Therefore, its wording or transparency cannot be controlled, since there is no information, agreeing to the cancellation of the same and the court would force the bank to return part of the amount paid (subject to deduction to take into account the time elapsed since insurance was taken out).
.-Judgment of the Provincial Court of Pontevedra, number 491/2019, indicates that there was an absolute lack of information and the client could never negotiate the conditions, that were imposed by the entity, which also appeared as a policyholder and beneficiary. In addition, it imposed the need to pay a predetermined early single premium, without informing the client of other possible options.
There is also no mention of the insurance in the mortgage loan deed, except for the payment of the premium from the loan capital, meaning a lack of information and transparency.
Not all court precedents are unanimous however, since there are opinions, such as that of the Provincial Court of Albacete number 308/2019, which believes that the life insurance is an independent contract from the loan and payment of the single premium in advance, indicates proof of knowledge of the costs.
If you were forced by your bank to take out a life insurance with your mortgage and wish to consider the possibility of cancelling it, contact our law firm, and we will help you.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
Carlos Baos (Lawyer)
White & Baos
Tel: +34 966 426 185
White & Baos 2020- All Rights Reserved.