The Spanish Real Estate Credit Act has been in force since 16 June 2019 and is not retroactive in relation to insurance matters. It therefore applies to all those who sign a loan to purchase their home from that date onwards.
This regulation improves consumer protection and also the situation of companies in the insurance sector. Below we explain the most relevant details.
Goodbye to Links Between Banking Products and Loans
The most important change introduced by the new mortgage law is the prohibition on banks selling products tied to any loan. This will only be allowed if it benefits the client, and the Bank of Spain will establish the criteria.
In addition, the bank may not penalise the client with worse loan conditions, either when the loan is first arranged or at renewal, simply because the client accepts a policy outside the financial institution’s own offer.
Life Insurance May Still Be Required, But It Can Be from Another Company
However, banks may still require the client to take out a policy that guarantees the obligations, such as life insurance naming the bank as beneficiary, so that the mortgage can always be repaid in full, including in the event of the insured person’s death.
That said, from now on banks are obliged to accept alternatives from other companies that offer this type of product, such as insurers, provided the policy meets equivalent conditions and benefit levels to the offer from the bank.
Elimination of Abusive Banking Practices
Banks may no longer charge additional fees for carrying out a comparative study of the insurance policies presented by the client when the consumer decides not to take out the bank’s insurance.
Banking institutions must also present market options to consumers much more clearly, so that they can easily distinguish the differences between several offers. One way to achieve this is by presenting products both jointly and separately, an obligation for banks included in the new mortgage law.