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El blog de Maria

Your daily Spanish Law reporter. Have it with a cafe con leche.

Legal Tip: 1456 - Spanish Law, Finance Regulators and hedge funds business examined by European Commission
09 May 2018 @ 15:33

What is the EU deciding with regards to assignment of mortgage debts to hedge/vulture funds? 

On 20 April 2018, the European Commission announced the admission for processing of the complaint filed by a Law Firm in Spain on behalf of 12 holders of Spanish mortgages for non-application of European law on credit transfer.

The European Commission informs that the conclusion of its investigation could lead to "an infringement process against Spain" for non-transposition or defective transposition of the community law.

What was the claim about?

The complaint states that in 2007, in the midst of the financial and real estate crisis, the Mortgage Law was reformed, and banks were then exempt from communicating to the mortgage holder that the mortgage debt had been assigned to a third party ( art 149 of Mortgage Act)

The regulations of the Mortgage Act also allows the borrower to renounce the right to be informed regarding the assignment of the mortgage and  this is now being abused by banks as they include a clause in the Mortgage contract by which consumers renounce those rights without full knowledge of the possible implications.

The complaint states that Spanish legislation is incompatible with art. 2 of the credit directive (2008/48/CE) that establishes that the consumer is informed in case the financial institution decides to assign its credit.  The same is mentioned in the recent Mortgage Directive 2014/17/EU which, despite not being transposed to Spanish Law, is applicable in Spain by the principle of primacy and effectiveness of European law.

Why is it important for debtors to know about the assignment of their debts?

The information on the assignment of a loan is very relevant because it is the only way to be able to exercise the right of pre-emption and buy-out contemplated in 1535 of the Civil Code.

The Credit Directive affirms that assignment of credits can never weaken the consumer's position. By not knowing who its creditor is, the consumer loses the opportunity to obtain a significant discount on his debt, which is enjoyed by a third party, a vulture fund, in an unjust enrichment.

Have financial regulation bodies in Spain supervised this?

The complaint also mentions passivity of (1) the Spanish National Stock Market Commission, which, according to lawyers directing the claim procedure, does not offer the transparency that is due to theses assignments and (2) of the Bank of Spain which allowed in its Circular 4/2004 for the transferred assets not to leave the balance sheets of the banks, encouraging a practice that only benefits the vulture funds and that seriously harms consumers

The famous street "Calleja de las flores", in Cordoba, Southe of Spain


Like 1


ads said:
03 July 2019 @ 08:55

One year on.....Do you know if this complaint has been upheld by the EU Commission or is it still awaiting a decision?
Has any infringement been made against Spain in this regard?
Has this unjust enrichment and effect on consumers been recognised by the EU Commission?

mariadecastro said:
03 July 2019 @ 14:58

The Comission has ruled that since the cession was not foreseen in the contract but it is a "mere practice", it can not pronounce itself. Also waives to pronounce on the adequacy of the aforementioned art. 1,535 to directive 93/13. "

In the opinion of the expert lawyer, this response could be described as "poor" because " Luxembourg can not wash its hands in the face of a practice that involves a clear imbalance between the parties and a clear detriment to the consumer".

The firm will study to bring the matter to the European Parliament and the European Ombudsman since "from their experience, Case Law always ends up granting legal protection to the weakest, in this case, the consumer".

ads said:
03 July 2019 @ 17:35

The trouble is Maria that it appears to take a decade and beyond to accomplish necessary doctrine and in the interim the innocents affected by this are sadly the ones paying the price.
Please keep us posted of events, and once again many thanks for your educative posts.

mariadecastro said:
04 July 2019 @ 08:14

I do agree, Ads. Too much power by Banks and Funds. Human beings and real economy not at the center

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