Understanding the Abusiveness of Multi-Currency Loans: Expert Lawyer Magdalena Rico Palao Explains

Magdalena Rico Palao – lawyer specializing in banking law – platform www.eliminarhipotecamultidivisa.es

Abusiveness of multi-currency loans: What is a multi-currency loan? When is a multi-currency loan considered abusive? Who can I complain to for abusiveness in my multi-currency loan? What does the Consumer Credit Contracts Law say regarding the abusiveness of multi-currency loans? Can I report the bank for abuse in my multi-currency loan? Lawyer María Magdalena Rico Palao, expert in Consumer Law, answers these questions.

What is a multi-currency loan?

The mortgage loan in foreign currency is not a financial instrument. Multi-currency mortgages do not constitute a service or an investment activity, carried out by a bank under the terms of a loan contract denominated in foreign currencies.

And multicurrency is not a financial instrument to the extent that it constitutes exchange activities that are purely incidental to the granting of the mortgage itself and the repayment of a consumer loan denominated in foreign currency.

What is the purpose of a multi-currency loan?

The purpose of these operations is not to carry out an investment, since the consumer only intends to obtain financing for the purchase of a consumer good (normally a home).

Furthermore, the multicurrency is a loan contract denominated in foreign currency and cannot be distinguished between the loan contract and a currency operation, since the object of the latter is the execution of the obligations of this contract, namely, those of payment of the capital, understanding that an operation of this type does not constitute a financial instrument in itself.

Therefore, multicurrency is not signed to speculate but to buy homes or consumer goods. As long as it is signed by a consumer who purchases their home with this financing, the multicurrency must have transparency and if this transparency does not exist in its placement, it can be claimed judicially.

When is a multi-currency loan considered abusive?

In previous posts we have highlighted the importance of the duty to adequately inform the retail client who signs a multi-currency mortgage, in writing or on a stable and durable medium.

Normally, in principle, the person affected by multicurrency does not have a qualified expert profile and it is assumed that he or she lacks adequate knowledge to understand complex products and with respect to which, generally, there is an asymmetry in information in relation to the Bank that has qualified personnel. contracted, reporting service, etc.

This unqualified profile character allows the person affected by the multicurrency to claim, and this understanding that the asymmetry in information caused the consumer to notarize a mortgage contract that he did not understand. And logically, this lack of diligence in the bank’s actions causes an abuse of its dominant position, which makes it reserve risk information about the operation that should have been shared with the bank client.

What happens if the duty to properly inform the client is omitted?

Failure to comply with the information obligations regarding multi-currency risks that the regulations impose on the Bank allows the client affected by multi-currency to file a legal claim. Added to this, it is important to take into account that Libor is an almost unknown reference index for a banking client, that the risk of currency fluctuation and its effect on outstanding capital was not explained in the majority of cases, that Pre-contractual information is also conspicuous by its absence, with a linear nature, in many cases studied, reasons that support the claim to the bank.

It is also important that in most cases the Ley 26/1988 on discipline and intervention of credit institutions and the Order of May 5, 1994, as no informative brochure or binding offer was delivered.

Who can I complain to for abusiveness in my multi-currency loan?

They can be claimed from the Bank, which is the one who has imposed the general conditions of the loan contract (multi-currency mortgage deed). It is the bank that is required to provide additional information that allows the consumer to make their decision to contract with full knowledge of the economic and legal burden that entering into the contract will entail, without the need to carry out a thorough and detailed analysis of the contract.

The multi-currency borrower must be clearly informed that, when entering into a loan contract denominated in a foreign currency. He exposes himself to an exchange rate risk that will eventually be difficult to assume from an economic point of view in the event of devaluation of the currency in which he receives his income.

The bank that places a multicurrency must expose the possible variations in exchange rates and the risks inherent in subscribing to a loan in foreign currency, especially in the event that the consumer borrower does not receive his or her income in this currency. And this is why multicurrency can be claimed, since an average consumer can know that currencies fluctuate. But you may not necessarily be aware that the variation in the amount of the installments due to currency fluctuations may be so considerable that it puts your ability to make payments at risk.

In this sense, we recommend starting the claim against the bank as soon as possible by sending an extrajudicial request requesting the nullity of the multi-currency mortgage.

Here you can find the prior requirement model to the Bank.

What does the Consumer Credit Contracts Law say regarding the abusiveness of multi-currency loans?

The legislation tells us that it is essential that the information that the bank gives to the client relates to the economic burden assumed by the consumer when signing a multi-currency contract.

You must also be informed of the significance that the devaluation of the euro has for the exercise of the bank’s power to prematurely mature the multi-currency loan, because it also represents a severe risk for the consumer who, despite not having incurred in contractual breach, He would be forced to return all the capital pending amortization at once.

Can I report the bank for abuse in my multi-currency loan?

We understand that yes, as long as your condition is that of a consumer purchasing your first, second or even third home. The effect of partial nullity entails the recovery of all damages from the multi-currency mortgage. You will be able to see the property damage of your multicurrency with our free calculator.

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