Miss-selling Claims against Spanish Banks – Could they really be liable for EURO 33 billion worth of claims?

You may or may not be aware but Spanish lenders have been taken to task since the country’s banking and construction industries nearly collapsed as a consequence of the global credit crisis.

Such was the ferocity of the banks actions, that after mass public demonstrations in 2012, law makers in Spain brought in new rules to help protect borrowers and make it harder for lenders to evict (desahuciar) people from their homes.

Since the first set of new consumer protections laws came into force, other lending or selling practices have come under scrutiny and it is now estimated that Spanish lenders could have potentially a total of 33.000 million € (30 billion GBP) worth of claims against them via the Spanish judicial system.

The upshot of this is that if you have had a banking relationship, especially if you have or had a mortgage from a Spanish lender, you may be sitting on a claim where these news consumer protection laws could be used to recoup any money you have been overcharged or get compensation for products you may have been miss-sold via one of the banking institutions in Spain.

In continuation of our series of articles by Fluent Finance Abroad about claims against Spanish banks, let´s have a look on another interesting claim that Spanish lenders are having to contend with.

The claims we are looking at are the mortgage set up expenses or costs which are mandatory when setting up a legally binding mortgage contract witnessed by Spanish notary. These expenses are imposed on the client and normally include mortgage tax (AJD actos juridicos documentados), notary, mortgage registration on the land registry, survey and bank legal processing fees.

Every mortgage in Spain have these set up costs and they have always been paid by the borrower and not by the lender.

In 2015 the Supreme Court has declared abusive to charge all the expenses on the client and lately this year the Court has stated that the client should only be responsible for document duties.

This means that all the mortgage contracts including this clause can be claimed for via the normal legal process, however the amount to be claimed depends on the city where the action is filed and is normally about 3.000 to 5.000 Euros but is dependent on the size of mortgage taken at the outset. The larger the loan the larger the claim could be.

According to the analysts of Kepler Cheuvreux, Spanish people have paid € 26 bln of mortgage opening expenses since 1997, according to their estimation Spanish bank might pay back € 6.5 to € 9.7 bln including interests and costs.

It will come as no surprise to know that all Spanish lenders have contested the Spanish Supreme Courts decision and have referred this case to the European Court of Justice who have yet to give their final ruling on this matter.

This means that claims that are in process are being successful but if the ECJ reverse the Supreme Courts decision, then these claims could come to nothing.

Each case must be accurately studied and it is very important to demonstrate all the mortgage expenses contained in your contract, providing us with the following receipts: Notary, Registry Office, Bank legal processing fees and the document duties payment receipts.

These receipts should have been issued with the title deed but can be obtained and FFA would be able to obtain these if necessary.

Our team of financial advisers and legal experts would welcome any inquiries and will advise accordingly with no financial obligation from the client. For more information please contact Fluent Finance Abroad.

Multi-Currency Mortgages

In continuation in our series of articles, Fluent Finance Abroad offers a quick insight into another type of mortgage claim, more uncommon than the ones described in our previous series of articles about mortgage set-up expenses and the famous clausula suelo. Today we are talking about Multi-Currency Mortgages, Foreign Exchange Currency Mortgages or as they are named in Spain, hipotecas multi-divisas.

Before the credit crisis, these types of mortgages were being promoted to the general public by various national and international lenders in Spain and the consequences have been dramatic as well as disastrous for many that took these out.

In order to have an idea of what this financial product is, firstly let´s be clear that multi-currency mortgage is not a financial instrument regulated in the Stock Market Law, it is an unregulated high-risk financial product. And that is the main posture that the Supreme Court has defended in its latest judgement 20th of September 2017.

This type of mortgage loan allows for the instalments of the mortgage to be paid in a different currency to that of the country where the loan / mortgage is to be taken, which in Spain is the Euro. Thus, when a multi-currency mortgage is taken out, instead of Euribor, another reference rate is used, which tends to be the Libor, which will be associated with a different currency – Yen, Dollar, Swiss franc or Pounds Sterling to name the most common.

The most important consequence of this change in reference rate is relevant to the total cost of the loan, as well as monthly, quarterly and yearly instalments. Like with the Euribor, the Libor and the currency with which it is associated evolve over time, whereby there can be increases that can make your mortgage loan more expensive, or, on the other hand decreases, which make it cheaper. In this respect, these fluctuations of the currency chosen against the euro will be what conditions the cost of the loan.

Being subject to the foreign exchange market, this type of loan entails high variability or volatility in the final cost of the loan and the amount of the instalments. We can say that these types of mortgages are the opposite of stable.

According to the Directiva (EU Directive) 2014/17/UE Banks have the obligation not only to provide complete and correct information so that the clients understand not only the grammatical sense of the contract, but also the financial risks undertaken by signing the multi-currency mortgage. By not doing so, banks don´t comply with the Directive as well with the well-known “transparency control”.

Multi-currency mortgage product is particularly aimed at customers with strong financial knowledge, as its functioning is somewhat more complex than that of a traditional mortgage based on Euribor. In order the claim to be successful it is necessary to make it clear that the client that has contracted the multi-currency mortgage is an ordinary customer, not a stock market player and had no intention to speculate with differences in the exchange rates.

Moreover, as stated in several judgements of provincial hearings (SAP Santa Cruz de Tenerife Section 4 of 18 January 2017, SAP Valladolid Section 1 of 9 January 2017, SAP Valladolid Section 1 of 9 January 2017, SAP Palma de Mallorca Section 4 of 16 December 2016) the fact that the client once made a change of currency would not demonstrate neither his understanding of this kind of product, nor his acknowledgement of financial risk of multi-currency loans. Therefore, this fact does not suppose any difficulty in getting the estimated demand.

If you took out a Multi-Currency mortgage in Spain in the past and have / have not had problems with the repayment of that mortgage, there is a very strong possibility that the lender will be found negligent by authorising such a complex finance vehicle to an unexperienced currency investor and we urge you to contact us ASAP.

Multi-currency mortgage loans are normally more complicated and complex than the “normal” clausula suelo ones. Each contract must be accurately studied by our team of financial advisers and legal experts. We would welcome any inquiries and will advise accordingly with no financial obligation from the client.


For more information please contact Fluent Finance Abroad on 952 85 36 47 or by email info@fluentfinanceabroad.com

Anti-Brexit Spanish Mortgage Strategy

If you are being put off buying a Spanish property because of the drop in the value of the pound you need to read our Anti-Brexit Spanish Mortgage Strategy carefully.

You may feel that property prices in Spain will be affected by fewer British buyers coming into the market although it is important to bear in mind that there are still many nationalities eager to purchase here and in particular French, Belgians, Germans, Scandinavian, Eastern European / Russian and Middle Eastern clients. We even have buyers from Australia, New Zealand, North America / Canada & South Americas getting involved in the Spanish property market.

This means that prices are still, in our opinion, on an upward trend and there seems to be no evidence that this is going to change anytime soon. We see prices still increasing in Spain.

As the value of sterling has dropped by 18% against the Euro since the Brexit referendum on the 23rd June 2016 we thought it would be a good idea to try and explain how using a Spanish mortgage to purchase a property in Spain or any other EURO denominated property can be a very good idea.

The rate of exchange on the 22nd of June 2016 was around the 1.31 mark and as of today (23rd October 2017), we see sterling has dropped to 1.11.

We speak to many real estate agents that specialise in selling to British based buyers of Spanish property and the feedback we get is that the drop in sterling is not really having an effect on the amount of enquires they are receiving but it is having an effect on the amount of their clients actually taking the plunge and purchasing the property of their dreams in Spain.

At Fluent Finance Abroad we constantly keep an eye on how our market is changing and study ways in which we can use the tools at our disposal to give our clients an advantage given the state of market conditions at any given time.

Hence we are now finding that savvy British buyers are not being put off buying property in Spain as they are taking advantage of the availablility of non residents Spanish mortgage lending to facilitate and hedge against the low sterling value and buying a property using a Spanish mortgage.

How the Anti-Brexit Spanish Mortgage Strategy Works.

Mortgages in Spain are expensive to put in place. However even allowing for the cost of setting the mortgage up, in the long term clients will potentially greatly win out by taking a Spanish mortgage now whilest the exchange rate is so low.

If we take the example of a client, who is going to purchase a property for 300,000€. If they buy in cash with all taxes and fees added to the price, they will pay a total of approximately 337,500€ for the property. At todays exchange rate of 1.11 the client would need to transfer £304,054 to purchase the property in cash.

Assuming the client took a maximum 70% Spanish mortgage on the property, the amount they would need to pay  for the property would increase to 345’000€ to cover the extra bank fees or £ 310,810 @ 1.11.

A 70% mortgage would be 210,000€ (This reduces the amount they need to transfer by £189,189 @1.11 to the £, meaning they need to transfer a total of £121,621 instead of the full £310,810 at this stage in the buying process).

Once Brexit has completed (or cancelled depending who whose opinion you agree with) and things have settled back to a degree of normality in 2-3 years time the exchange rate should recover to around the pre Brexit rate of 1.31 to the £. At this point the client would need to transfer an amount of £160,305 to clear the mortgage completely.

This makes no allowance for the amount the client would have paid off the mortgage during the time they had it. Even taking into account the extra 7,500€ paid in Spanish mortgage set up fees the client has still managed to save themselves  £28,884 on the price of their property by taking advantage of the poor exchange rate.

It is important to point out that one of the main advantages of a Spanish mortgage is its flexibility when it comes to making early redemption payments of the loan amount either partially or in full. The fees to reduce the mortgage or to cancel the entire mortgage are very small and so you will have a great deal of flexibility to reduce the mortgage when the exchange rate goes in your favour. For example if you reduced your Spanish mortgage by €10,000 in the first five years, the charge would be €50 and after five years this is reduced again down to €25 for every €10.000 you reduce the mortgage amount by.

We are a long-established firm of independent mortgage brokers based locally in Spain and we have agreements with all of the major lenders. If you would like to discuss the Spanish mortgage market with us, we would be delighted to have a meeting or a telephone call to inform you of all of your finance options and to tailor an offer specific to your needs.

We look forward to hearing from you.

Contact us today.

Meet Marc Elliott…

Marc Elliott is the British expat and brains behind Fluent Finance Abroad, the mortgage specialists based in San Pedro de Alcántara, Marbella.Providing clients with the most appropriate form of finance to purchase their dream home abroad, Marc – being half Spanish – has taken to life on the Costa del Sol like the proverbial duck to water. When he’s not hard at work sorting out people’s mortgages, Marc can be found relaxing on the beaches of Conil in Cádiz or occasionally belting out some top tunes in a karaoke bar…

What brought you to the Costa del Sol?

I am half Spanish, on my mother’s side, and therefore have been coming to Spain since I was a child so I have always wanted to live and work in Spain at some point in my life. Luckily I was offered to come to Spain and work as a mortgage consultant specialising in the Spanish mortgage market. The chance came about due to the qualifications I’d obtained in the UK and the fact that I was fluent in Spanish. I was 29 when I left London to move to Marbella.

Your life before relocating to the Costa del Sol?

At the time of leaving the UK I was working in the UK mortgage industry in London for a company called Mortgage Next. I owned my property which I rented out and I was establishing myself in the mortgage business in the UK.

Why and how did you come to set up Fluent Finance Abroad?

Having worked under strict regulations in the UK I was completely taken aback when I started working in Spain. Advisers in the UK are under constant pressure to pass exams and comply with mortgage rules protecting lenders and consumers. Unfortunately, in Spain there were/are NO rules regulating mortgage advice or practice so the mortgage market here was a free-for-all and that basically scared the hell out of me. The banks were out of control and had massive gaps/loopholes in their lending policies which people that advised on mortgages here (meaning absolutely anyone with or without any financial background) could sell Spanish mortgage products. Some were responsible but many others took full advantage of the holes and encouraged irresponsible lending. I tried working for a couple of companies but in the end I decided that I had the skills to create a responsible, knowledgeable and truly independent mortgage consultancy which made sure that both lenders and consumers were properly looked after. I believe that I have achieved that and I am looking forward to developing the business so that we can ensure we help more people have successful long term relationships with Spanish lenders.

Tell us about what you do and what it involves

As above, but to add, we ensure that we are 100% up to date with lending policies with all Spanish mortgage providers. We then try and explain that criteria to potential Spanish mortgage borrowers and see which provider would best suit their needs to ensure that the transaction with be a successful one at the point of sale and through to the termination of the mortgage. We make sure that we explain each case to the lenders in great detail, in their language, so that they have the correct understanding of each client’s application to ensure confidence that they are lending the correct amount to the correct people. It isn’t as easy as you may think, as you need to explain a client’s fiscal situation which exists in a different country with different rules and ways of doing things. This is why I feel that being able to communicate well with lenders and clients is essential to this business.

How do you start your day?

I normally wake early, get ready, say goodbye to my partner and make sure that our dog, Cindy, gets off to Doggy Day Care safely. Then it’s off to the office, set up, go for a coffee and a small breakfast with the team. It’s a nice way to start the day if I am honest.

What part of your work do you enjoy most?

Completing on each deal and helping people realise their dreams.

What motivates you?

Doing good work and being able to make people better off financially with the advice we give. I also enjoy being able to create employment for good people in their area of expertise.

And when you’re not working?

I do enjoy time away from work and I love to spend time with friends and family, good food, wine, sports, music and generally enjoying myself and others.

What do you love best about your Costa del Sol lifestyle?

Lots of things but the Spanish culture and the beautiful weather are real positives for me.

Your favourite beach?

I do love the beaches on the coast in Cádiz. Conil is a particular favourite of mine but I also enjoy going to lakes up in the mountains.

Your favourite Sunday lunch venue?

The Hogan Stand in San Pedro de Alcántara… very good value for money and excellent food.

Your favourite Spanish dish?

I do really enjoy shellfish in a Chiringuito on the beach, especially with the good bottle of white wine nicely chilled.

Preferred night out with friends/family?

Anywhere with good food and maybe a little dance later on. My girlfriend Kelly loves a bit of karaoke so she might drag me into a bar for a sing song!

Jump in the car at the weekend, where do you head?

North to the mountains, Sierra de Grazalema is always a good choice, El Chorro lakes near Málaga or the airport for a break slightly further afield.

Have you had the opportunity to travel much in Spain?

I have travelled extensively throughout Spain over the years although I have missed visiting the northeast of the country. I have been to Barcelona city on a few occasions and I would very much like to visit the surrounding areas.

What’s the best thing about the Costa del Sol?

The Costa del Sol is as great a place to be as any other… you can spend as much time as you wish outside enjoying all that the area can offer. There aren’t many days that you’d prefer to stay in to keep warm rather than going out. There aren’t too many reasons to not be content in my opinion.

What things have you learned? How has your life changed since living in Spain?

I feel that I have learned to better understand how to find a better life/work balance.

One thing you miss about the UK?

My friends, but not too much really as London is only a couple of hours away and easy to get to.

The Costa del Sol now and when you first moved here – what differences stand out for you?

I have been here for 11 years now and I can’t really pinpoint any major changes to the place since I have been here apart from the infrastructure is still getting better.

Do you speak Spanish?

I am and have been pretty fluent since I was a child, so yes.

What does the future hold for you?

Hopefully more good times please!

What advice would you give to someone relocating and wanting to start a business here?

If you have an open mind but stick to your principles and goals, be patient but take calculated risks, learn the language and smile in the face of adversity, you’ll be fine!

Marc Elliott is the founder of Fluent Finance Abroad, a VIVA Recommended Partner. You can contact Fluent Finance Abroad on +34 952 853 647, at melliott@fluentfinanceabroad.com or at www.fluentfinanceabroad.com