Government approves procedure for banks to reimburse their clients for sums unlawfully charged under 'floor clauses'

Moncloa Palace, Madrid

The Council of Ministers approved a Royal Decree Law on urgent measures to protect consumers from unlawful 'floor clauses'.

The Minister for Economic Affairs and Competition, Luis de Guindos, explained that, according to the figures offered by the Bank of Spain, 1.5 million people may be affected by floor clauses that are null and void. Due to the size of this group, the government considered it "necessary and urgent to intervene and offer a parallel channel to judicial procedures" with the aim of avoiding the courts of justice collapsing and providing injured parties with a high-speed procedure to "thus recover those amounts that were unlawfully charged". He also clarified that the measure also affects mortgages that have already been cancelled.

Claim mechanisms

Luis de Guindos indicated that the new legislation approved on Friday "is a claim mechanism prior to bringing judicial action and is voluntary for those consumers affected by a 'floor clause'. Credit institutions, on an obligatory basis, must inform their clients and publish, within a maximum period of one month, the existence of this out-of-court alternative in the case that they wish to use it.

Consumers may address a claim to their credit institution, which must provide a calculation of the sum to be reimbursed, including interest payments, or the reasons why they consider that no claim exists. If the client agrees with the calculation, the institution will make the reimbursement in cash, although the two parties may agree on compensatory measures, such as a reduction in future mortgage instalments. This whole process must be completed within a maximum period of three months.

The minister stressed that in the event of compensation, the client must express their explicit understanding of the instrument that has been offered as an alternative to payment in cash.

The second way to make a claim is to resort to the courts directly, but if the consumer opts for this channel they will not be able to exercise the right to the out-of-court channel approved on Friday. In the case of actions already before the courts, the parties, by mutual agreement, may request the suspension of the procedure and sign up to the channel approved on Friday.

Legal costs

Pool Moncloa/Diego CrespoThe minister underlined that the mechanism "incentivises financial institutions to suitably resolve these procedures in good faith". If the consumer subsequently sues the bank having not reached an agreement in an out-of-court claim and the ruling handed down is more economically beneficial for him, the institution will be obliged to pay the legal costs. If the consumer directly resorts to the courts, without using the prior voluntary procedure, and the credit institution pays the amount unlawfully charged responding to the legal action, it will not be responsible for the legal costs.

The procedure for out-of-court actions will be free of charge. A significant reduction in notary and registry fees derived from the novations of contracts that may be applicable, due to the adoption of compensatory measures other than cash reimbursements, has also been provided for.

Fiscal treatment

Luis de Guindos clarified that "the amount to be reimbursed to the consumer will not be included in the base amounts for Personal Income Tax purposes nor the potential interests that may be agreed as a result of an agreement between the parties".

In the event that the consumer had deducted these amounts in previous financial years, the regularisation of this, that is, in a complementary return, will not be subject to any form of sanction, or late payment interest or any form of surcharge. This will therefore "guarantee the neutrality of this procedure from the point of view of Personal Income Tax", reiterated Luis de Guindos.

Oversight body

The Minister for Economic Affairs and Competition announced that the government will regulate the establishment of an oversight, control and evaluation body for claims made in application of the Royal Decree. Consumers and lawyers will both be represented on this body. It will issue a half-yearly report and ensure that the financial institutions meet their reporting obligations, above all, vis-à-vis vulnerable individuals.

Luis de Guindos highlighted that the new legislation was agreed with Ciudadanos, the PSOE [Spanish Socialist Workers´ Party], the PNV [Basque Nationalist Party] and the Canary Island Coalition, which "is very important and indicative of the interest in dialogue we have all shown on an issue of great importance to society".

New Mortgage Act

The minister reported that the government has spent months working on a new Mortgage Act to "strengthen transparency and ensure that there is no repeat of situations" such as those in relation to 'floor clauses'. In this regard, he recalled that, at the start of 2013, mortgage debtors were forced to acknowledge and recognise their existence. In his opinion, "this was an act of transparency" that will be maintained in the future Mortgage Act.

Luis de Guindos announced that the new legislation will strengthen pre-contractual information so that, before signing a mortgage loan before a notary public, the client will be aware of "all those clauses that are particularly sensitive", not only 'floor clauses' but also early repayment conditions, for example.

Response to cold snap and snowstorms

At the meeting of the Council of Ministers, the Minister for Public Works, Íñigo de la Serna, reported on the inclement weather that has affected part of Spain from Thursday to Friday and the actions carried out by the government to resume normality, an issue that was also reviewed on Friday at the National Security Council.

Íñigo de la Serna highlighted, first of all, that people were warned over the course of the week by various bodies, such as the State Meteorology Agency, Civil Protection and the Directorate-General of Traffic (Spanish acronym: DGT). Secondly, he referred to the "exceptional" nature of the situation, due to the regions where this occurred, the amount and duration of snow that fell and the "abnormally low" temperatures.

Pool Moncloa/Diego CrespoThe minister explained that, in addition to the measures already adopted as part of the winter roadworthiness campaign, and due to the worsening of the meteorological conditions, the government activated a crisis cabinet on Thursday afternoon. The State Secretary for Infrastructures travelled to Valencia to address the situation, together with the Government Representative for the region, and to coordinate the actions of the DGT, the Guardia Civil, State Highways, Civil Protection and the Military Emergency Unit (Spanish acronym: UME).

Railways and highways

In relation to the railways, 27 medium- and long-distance and high-speed train services have had to be altered or cancelled over the previous 24 hours. In total, 4,774 passengers were affected. The province of Albacete suffered the worst consequences of the weather conditions: traffic was suspended on the high-speed line between Albacete and Alicante and on the conventional line between La Encina and Chinchilla.

In relation to the highways, Íñigo de la Serna specified the "numerous" incidents on the State Highway Network, which particularly affected two stretches of the A-3: the first between Requena and El Rebollar heading towards Valencia, and the second between Buñol and Siete Aguas heading towards Madrid. The combination of the heavy snowfall, several traffic accidents and the collapse of three electricity pylons made access to the highway impossible for both vehicles to clear away debris and for personnel responsible for re-establishing the traffic flow.

The Minister for Public Works thanked the personnel from the various ministerial departments and the State law enforcement agencies for their "tremendous" efforts, as well as the Government Representatives and regional governments for their collaboration. He also passed on the government's apologies to all those people affected by these circumstances "who have had to suffer truly difficult situations".

In terms of the weather forecast, he pointed out that this is moving in a north-westerly direction "but losing force", although it is still necessary to pay close attention to the recommendations from the DGT and the situations announced by RENFE. The government will "closely monitor" the situation, and both he and the Minister for Home Affairs, Juan Ignacio Zoido, have requested to appear before the Lower House of Parliament to take stock of the actions that have been taken "right from the outset". In terms of future actions, he admitted that "we need to improve" and "analyse more closely the protocols for action".

Other Council agreements

Pool Moncloa/Diego CrespoThe Council of Ministers regulated the treatment of vehicles at the end of their useful life. The Royal decree, highlighted Íñigo Méndez de Vigo, promotes the re-use of spare parts, materials and components from vehicles and establishes the obligation on manufacturers and importers to organise the collection and management of these items. Furthermore, the information to be supplied by manufacturers and waste management companies will be systematised.

On another note, the government established the guidelines for preparing a shortlist of candidates for a judge to be elected to the European Court of Human Rights. The goal is to avoid any discretionary action and enhance transparency through a procedure that is rigorous, objective and respectful of the principles of ability and merit.

The Government Spokesperson pointed out that the procedure is identical, except for the individual characteristics of each jurisdiction, to that implemented in the previous term of office for the election of members of the courts of the European Union, "which received great praise from the EU institutions".

Conference of Regional Presidents

The Vice-President of the Government and Minister for the Presidency and for Regional Authorities, Soraya Sáenz de Santamaría, presented the Council of Ministers with a report on the 6th Conference of Regional Presidents, held on 17 January.

Íñigo Méndez de Vigo thanked the councillors of the 15 regional governments and two autonomous cities that attended the meeting for their participation, at which "a productive exchange of ideas and opinions took place, which was always respectful of the diversity of criteria surrounding common problems affecting all the people of Spain".

The Government Spokesperson reviewed the agreements reached at the Conference, starting with those relating to the reform of the system of regional financing and the sustainability of the Welfare State. He argued that it is very important to tie the two issues in together, since 70% of public expenditure under the Budget is allocated to social spending and many of these powers are directly implemented by the regional governments.

The Council of Ministers debated one of the agreements reached at the Conference - the coordination plan for emergency aid for refugees - and agreed that on Monday 23 January, the committee tasked with this issue would meet, chaired by the State Secretary for Cooperation.

Current affairs

Pool Moncloa/Diego CrespoWhen asked about the government's expectations of the presidency of Donald Trump, who will be invested as the President of the United States on Friday, the Government Spokesperson highlighted the government's interest in ensuring that relations between the two governments are "as wonderful as they are at this time", and added that "we have made a lot of ground, because relations are excellent and that is how they should remain".

In relation to the start of the oral trial of Francesc Homs by the Supreme Court as a result of holding the referendum on the sovereignty of Catalonia on 9 November 2014 and the possibility of this situation frustrating communication between Central Government and the Regional Government of Catalonia, Íñigo Méndez de Vigo stated that the government is in favour of dialogue because dialogue to the benefit of our citizens is "positive and constructive". In his opinion, "there is no contradiction between legality and dialogue: we must foster dialogue, but this cannot be used as an excuse to circumvent the law".