BANKS IN SPAIN are now no longer allowed to charge an overdraft fee, in addition to non-payment interest, following a recent verdict by the Supreme Court brought about by a customer of a Basque Country-based high-street entity.
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.
Defaulting on a loan or mortgage eventually allows a lender to take legal action to reclaim the debt, such as seizing secured assets, but 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 pre cent 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.
In the case of Kutxabank, formerly known as the BBK and which operates all over Spain, it’s procedures for charging €30 each time a customer goes into unauthorised overdraft or his or her monthly mortgage repayment is more than a week late has been halted by highest contentious court in the country.
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.
Also, interest at current rates is automatically charged for an unauthorised overdraft after a set period of days, or for late payment of a loan or mortgage instalment, as standard practice, and the Supreme Court considers that a penalty fee on top is a ‘double punishment’.
As yet, it is not clear whether the Supreme Court verdict applies retroactively and for how long this would affect past payments, but it appears likely it will only be effective from the date of the judges’ collective decision.