Abuses committed by the banking sector – including interest floor clauses, repossession of first dwellings and compulsory subscription of financial products – were exposed in some of the heart-breaking stories that emerged when the real estate bubble burst. Now (better late than never), Parliament approved the new Mortgage Act that entered force on 16 June. 2019, and that boosts protection of consumers and enhances transparency.
Mandatory products are prohibited
With the excuse of improving your credit conditions, the lending bank forced or conditioned you to contract related services such as credit cards, direct crediting of salaries, direct debiting of household bills and insurance policies linked to the mortgage loan.
Now they can only offer these services and products, but the customer has the right to report any attempts to force you to accept them in return for discounted interest rates. The financial institution is obliged to accept alternative insurance policies with equivalent conditions, cover and benefits to those proposed by the bank, which will not be allowed to charge fees for analysing the policies submitted by the customer. And a VERY IMPORTANT point is that accepting an alternative policy must not entail “tougher loan conditions of any kind whatsoever”.
The notary looks after the consumer
Customers may ask for an explanation of the small print and that bank will be obliged to answer, clarifying the mortgage clauses, the distribution of costs and the circumstances that could arise (favourable or otherwise). With this information, people who have decided to take out a mortgage have to visit the notary public one day before signing the contract to receive free advice and do a test.
Interest rate floor clauses are also prohibited, fees for early payment are reduced and the grace period for repossession is increased to twelve or fifteen instalments pending payment. Furthermore, the bank must bear all expenses associated with taking out a mortgage loan except appraisement of the property.