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Banks will have to explain better their mortgage contracts.

Banks will have to explain better their mortgage contracts.

Spain will incorporate to its legislation the Directive 2014/17 CE of 4th February 2014 on credit agreements for consumers relating to residential immovable property. It means that banks will have to disclose information on their financial products or insurance accessories attached to their mortgage contracts. This includes credit cards, house or life insurance, etc.

According to the article by the Spanish newspaper El País, the draft of this law is coming with one-year delay and it will force banks to be more transparent in their contracts and in their practices, and it will also regulate their activities when offering mortgages or other products to clients. So, this law will forbid banks to sell mortgages with the obligation to hire other products and they will also have to present two budget mortgage contracts: one with these accessory products and another without them; the purpose is to clearly inform clients how much they will pay for each contract.

The proposal for this law intends to go further and it might include something unusual until now: to require banks to explain their products with more transparency, e.g clients will have to sign a document before the notary stating that they know all the necessary information about the mortgage contract. The proposal is that this act before the notary be free of charge, even if the mortgage ends up not being signed.

Julio Prieto
Spanish Abogado
Del Canto Chambers

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