22 Feb The Spanish Supreme Court has ordered the annulment of several clauses subscribed with customers by Banco Santander, BBVA, Bankinter and Caja Madrid that were included in contracts for loans, mortgages and credit cards, as these have been considered as “abusive”, “disproportionate” or “confusing”.
In a verdict released several days ago, the Chamber of civil matters of the High Court partially admits the appeal filed by the Spanish Organization of consumers and users (OCU) against the decision of the provincial court of Madrid who had declared as valid several reported clauses in the year 2005.
Amongst the clauses now voided by the Supreme Court are the ones that exclusively penalised the owners of credit or debit cards for the damage carried by its fraudulent misuse as long as those circumstances were not communicated to the bank. The verdict establishes that “the existence of a loss or theft must be communicated without undue delay since the disappearance is known”.
However, the verdict declares that “clauses totally exempting the Bank of liability indiscriminately and without nuance or modulation are abusive” and “disproportionate”, since “there are very frequent cases where the bank’s diligence warned about undue uses and even warned users, who were unaware”.
The Court situates on the same line those clauses that exclude “whatever the case” the responsibility of the bank when the PIN or card password is obtained by coercion or force majeure.
Magistrates insist that “is noteworthy that, in certain circumstances, banks can warn undue uses using the diligence which from them is enforceable in harmony with their experience and technical resources”.
Pretext to rescind the contract
In the paragraph about mortgages, the magistrates declared abusive those clauses prohibiting the leasing of mortgaged estates, even though they admit such deeds can decrease the value of the property. Therefore they argue that these clauses should establish how much rent must the owner demand in order to correct the “decreasing value” the lease may cause the bank in the case of non-payment of the loan and of need to repossess the property.
The Supreme Court also rejects that banks include contract clauses regarding the resignation of customers receiving a mortgage or other loans about being informed of these being transferred to another bank or entity. “Its unfairness is unquestionable” because “it implies a waiver or limitation of the rights of the consumer”, the judgment argues.
Another voided condition in the loans paragraph it the one allowing Banco Santander to compensate receivables from clients with those positive balances held in other products, even if they were not their only holders. The Supreme Court understands that this type of clause is valid only if they are “transparent, clear, concrete and simple”, conditions that the wording of the clause of Banco Santander was not meeting.
The Court also termed as “illicit” the power of a bank to resolve in advance term-granted loans when an embargo of the borrower’s assets occurs or his solvency is diminished by any cause.
In this regard, judges believe that this condition is looking for “any negative impact on the borrower’s heritage, actual or potential, can serve as an excuse” to have the contract early terminated, thus ”giving the financial institution a discretionary and disproportionate power (…)”.
Published on: Feb 22, 2010