In review: consumer finance law in Spain - Lexology

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Overview

With the persistence of the covid-19 health crisis, the legal consumer finance landscape in Spain has remained severely conditioned by the evolution of the pandemic throughout 2021. Spain remained in a state of emergency until 9 May 2021, which had originally been approved via Royal Decree 926/2020 of 25 October and extended by Royal Decree 956/2020 of 3 November. From a legislative point of view, the main implication has been delays in the approval of a number of measures, including some that had initially been intended for 2020 and had already been delayed by the initial outbreak. From an economic point of view, the pandemic has entailed a significant increase in public spending, accompanied by a slowdown in economic activity in certain sectors, as a consequence of the restrictions imposed by the health authorities in their efforts to combat the pandemic. However, progress in vaccination and the effectiveness of measures implemented by the authorities to mitigate the impact of the pandemic have allowed a progressive recovery of pre-pandemic levels of activity, which has prevented an increase in the number of non-performing loans.²

With the gradual return to business as usual, the authorities' legislative focus has mainly been on (1) reacting to the evolution of the pandemic by adopting and implementing any necessary measures required from time to time, and (2) planning for the recovery of the Spanish economy, with the Council of Ministers' approval of the Spanish Plan for Recovery, Transformation and Resilience, which should expedite Spain's access to the 'Next Generation EU' funds.

Legislative and regulatory framework

i Legislation

Broadly speaking, Spanish consumer-finance regulations follow European rules and are based on the general consumer law framework. The following is a brief overview of the most important applicable regulations. In addition to the below-mentioned general regulations, various regional provisions apply.

General framework

Royal Legislative Decree 1/2007 of 16 November approves the revised text of the general law for the protection of consumers and users and other supplementary laws, which regulates the general terms and conditions that apply to the relationship between companies (including credit entities) and consumers (i.e., the rights of consumers, contracts executed with consumers, rights of withdrawal, unfair clauses and vendor liability). This Royal Legislative Decree has been modified several times in 2021, namely by (1) Royal Decree-Law 1/2021 of 19 January, which introduced and developed the concept of 'vulnerable consumers' in line with the New Consumer Agenda published by the European Commission in 2020 and considering the lasting impact of the covid-19 pandemic; and (2) Royal Decree-Law 7/2021 of 27 April and Royal Decree-Law 24/2021 of 2 November transposing certain directives of the European Union as regards contracts for the sale of goods and the supply of digital content or services.

Law 7/1998 of 13 April governs contracting with consumers by adhering to general terms in contracts. Law 7/1998 transposed Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts into Spanish law. All court-declared unfair clauses are recorded in Spain's General Terms in Contracts Registry, which was created by Law 7/1998. Citizens may check this registry to verify whether the clauses included in their contracts are unfair prior to entering into the contracts.

Deposit and lending services

Law 10/2014 of 26 June on the organisation, supervision and solvency of credit entities,³ and related Order EHA/2899/2011 of 28 October on transparency and protection of banking services consumers and the Bank of Spain's Circulars 5/2012 of 27 June and 4/2020 of 26 June are addressed to credit entities and payment services providers, on the transparency of banking services, lending responsibility and publicity of the underlying products and services. Circular 5/2012 has been amended by the Bank of Spain's Circulars 1/2021 of 28 January and 3/2012 of 13 May with the objective of increasing the number of official interest rates available to credit entities to be used as main and substitute interest rates in the granting of loans.

Order ECO/734/2004 of 11 March on customer service departments and services and the ombudsman for customers of financial institutions outlines the functioning of the complaints departments of such institutions.

Law 16/2011 of 24 June on consumer credit (LCC), which regulates the granting of credit to consumers, transposed Directive 2008/48/EC of 23 April 2008 on credit agreements for consumers into Spanish law. The LCC applies to credit granted by an entity (as part of its commercial or business activity) to a consumer (defined as natural persons who are acting outside their trade, business or profession). Specific contracts are excluded from the scope of the LCC including, among others, contracts with consideration of less than €200, credit agreements secured by mortgages or leasing agreements.

Law 28/1998 of 13 July on the sale by instalments of movable goods complements the LCC by establishing the contractual framework for the sale by instalments of non-consumable and identifiable movable goods of loan contracts intended to facilitate their acquisition and of the guarantees created to ensure compliance with the obligations arising therefrom.

Law 22/2007 of 11 July on distance marketing of consumer-financial services applies to contracts for financial services entered into between regulated entities and consumers where the services are rendered and the contract has been formalised at a distance. It contains a set of rules that govern the provision of pre-contractual information, communications, rights of withdrawal, payment and unsolicited services and communications.

Law 5/2019 of 15 March on real estate credit (LREC) partially transposed Directive 2014/17/EU of 4 February 2014 on credit agreements for consumers relating to residential immovable property into Spanish law. The main purpose of Directive 2014/17/EU was to harmonise the regulations on consumer protection with regard to the procurement of mortgage loans, as well as to strengthen legal transparency in the granting of real estate financing and decrease litigiousness in connection with specific unfair clauses (as it established which party had to bear each of the costs related to the granting of a mortgage-backed loan). At the national level, the LREC's scope extends to all natural persons, regardless of whether or not they are consumers.

Law 2/2009 of 31 March on contracting mortgage loans and credit with consumers and brokering the execution of loans and credit regulates the granting to consumers of mortgage-backed loans and the rendering of brokerage services for the granting of consumer loans. Under this regulation, entities (other than credit entities or financial credit establishments) granting mortgage-backed loans or rendering brokerage services for the granting of mortgage-backed loans to consumers must be registered with the public registry of the region where their registered address is located. Foreign entities must be registered with the national registry maintained by the National Consumers' Institution in accordance with Royal Decree 106/2011 of 28 January.

Royal Decree-Law 6/2012 of 9 March on urgent measures for the protection of low-income mortgagors (1) includes, among other things, a code of good practices, to which financial institutions may voluntarily adhere in order to assist with the renegotiation of loans and, if not possible, to accept payment in kind (eliminating, in practice, the full recourse nature of the secured loan); and (2) introduces some flexibility in connection with out-of-court repossessions of the mortgage collateral. Law 1/2013 of 14 May on measures to reinforce the protection of mortgage debtors, debt restructuring and social renting and Royal Decree-Law 6/2012 have been amended a number of times. As a consequence of these amendments: (1) the subjective scope of the measures of protection has been broadened; and (2) the moratorium on evicting vulnerable households has been extended until May 2024.

Law 25/2015 of July 28 is on the second-chance mechanism, the reduction of financial burden and other social measures for individuals. Law 25/2015 was recently modified by Royal Legislative Decree 1/2020 of 5 May approving the consolidated text of the Insolvency Law.

Payment services and crowdfunding

Royal Decree-Law 19/2018 of 23 November on payment services and other urgent financial measures (Royal Decree-Law 19/2018) partially incorporates into Spanish law Directive (EU) 2015/2366 of 25 November 2015 on payment services in the internal market (PSD2), together with Regulation 2015/751/EU of the European Parliament and of the Council of 29 April 2015 on interchange fees for card payment transactions.⁴

Royal Decree 736/2019 of 20 December on the legal regime for payment services and payment institutions (Royal Decree 736/2019) continues to pursue the transposition of Directive (EU) 2015/2366 into Spanish law. In particular, Royal Decree 736/2019 expands on the legal framework governing payment services and payment institutions by regulating aspects concerning the authorisation and activities of payment institutions including, among others, the requirements for own funds and guarantees, risk controls and client protection, as well as the requirements from which they may be exempted depending on their activity, size and volume of transactions.

Law 5/2015 of 27 April on promoting corporate financing deals with crowdfunding for the first time in Spain and lays out the requirements applicable to platforms providing these services.

ii Regulation

The Bank of Spain, the Spanish Securities' Market Commission (CNMV) and the Directorate-General for Insurance and Pension Funds (DGIPF) are mainly in charge of implementing and enforcing regulations on consumer-finance services in Spain with regard to, respectively, (1) credit entities, payment services institutions and electronic-money institutions; (2) investment services firms, as well as funds and fund management firms; and (3) insurance companies. To carry out these functions, these institutions have legislative powers and may issue circulars.

The complaints departments of these three types of institutions were identified in Law 44/2002 of 22 November, on measures to reform the financial system, as the competent bodies to deal with and resolve any complaints, claims and queries that financial customers may have. As part of the legislative reform in the financial sector in the years that followed the 2008 financial crisis, Law 2/2011 of 4 March on the sustainable economy and Order ECC/2502/2012 of 16 November on the procedure for submitting claims to the complaint departments of the Bank of Spain, the CNMV and the DGIPF modified the Spanish system for addressing customer complaints in the financial sector, aiming to improve the efficiency and effectiveness of these departments.⁵ Resolutions issued by these departments are not binding but tend to be followed by the institutions, as reflected in the annual statistics set forth in Section IX regarding credit institutions and the complaints department of the Bank of Spain.

Consumers may also state their complaints and submit suggestions through Spain's regional consumer associations. Given the structure of regional governments, Spain has 17 distinct consumer protection bodies (one per autonomous region). Some municipalities and cities have also created their own bodies.⁶

source: https://www.lexology.com/library/detail.aspx?g=dc127e9b-8374-4e7c-81a6-b06edc4db65e

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