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Banks cannot charge overdraft or late payment fees, rules Supreme Court
31 October 2019 @ 18:03

BANKS are no longer allowed to charge an overdraft fee in addition to non-payment interest following a landmark verdict by the Supreme Court brought by a customer of a Basque Country-based high-street entity.

Kutxabank, formerly known as the BBK and which operates all over Spain, has been rapped over the knuckles by the highest contentious court in the country for charging €30 each time a customer goes into unauthorised overdraft or his or her monthly mortgage repayment is more than a week late.

The verdict refers to a case in the European Court of Justice (ECJ) of October 3 this year – the 'Gyula Kiss' case – which states that the consumer must be able to check there is no overlap between fees charged and services provided.

Another ECJ hearing of February 26, 2015 – the 'Matei case' – found a clause involving a charge for late payment of a loan or mortgage to be 'abusive', since it constitutes a 'sanction' for the 'simple risk banks run in providing credit', despite 'sanctions' already being provided for in terms of 'legal and contractual consequences'.

In other words, defaulting on a loan or mortgage eventually allows a lender to take legal action to reclaim the debt, such as seizing secured assets, after a set period of time or percentage of the credit unpaid – in the case of mortgages, no action can be taken until either the unpaid monthly instalments total at least 20% of the overall debt or a full year's worth of quotas have been missed, whichever comes first, according to an EU directive which Spain has recently incorporated into national law.

And the risk the bank takes in lending money to consumers is one that the entity itself is required to bear, protected by these legal measures, but by charging a penalty fee for late payment, in addition, means removing some or all of this risk, going against the fundamental nature of this business venture.



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