Bank fraud: nullity of UCI mortgages
Provincial Courts, such as those of Cádiz, Zaragoza and Asturias, have condemned the Unión de Créditos Inmobiliarios (UCI), a finance company owned by Banco Santander, for breaching the rules of information transparency or declaring its system of capital amortisation null and void, with unaffordable repayments that have caused serious problems to many families.
During the years when the real estate bubble burst and amid a period of credit restrictions by the banks that have traditionally monopolised the largest shares of the mortgage market in Spain, Banco Santander was deriving high-risk mortgage loans from Unión de Créditos Inmobiliarios (UCI), its finance company, also owned by BNP Paribas.
These were mortgage loans that were unviable for most financial institutions because of the precarious economic situation of the customers requesting the loan, but which were approved by UCI. Faced with the need to buy a home or move house, thousands of young couples and families who had difficulty accessing a traditional mortgage loan opted for this alternative, which was presented to them as an attractive and affordable product. It is estimated that between 2009 and 2012, more than half a million mortgages of this type were marketed.
In most cases, these mortgages were marketed through real estate agencies that offered the management, negotiation and processing of mortgage loans with their real estate sales and purchase service. They acted as intermediaries for the UCI. Even so, the consumer only had contact with the UCI on the day of signing the contract in front of a notary, which is when he was faced with all the paperwork and small print.
An amortisation system with unaffordable repayments
As a general rule, Spanish banks’ mortgages are based on the French amortisation system, according to which the instalments you pay are constant or fixed and serve to pay part of the interest and part of the capital. During the first years of the mortgage, you pay more interest than capital, while in the last years almost all you pay is capital and the interest rate goes down.
Unlike these conventional mortgages, the principal repayment system of UCI mortgages establishes a very low fixed instalment during the initial period of the mortgage payment (between 5 and 10 years), but at an unusually high-interest rate, and the amount of interest that is not covered by the instalment is added to the capital of the loan. Therefore, debt continues to increase, generating new interest even if we keep up with the repayments. This is known in legal terms as anatocism and, in many cases, has generated exorbitant and unaffordable monthly repayments in the last years of the mortgage.
Although this is not an abusive practice per se and is included in the Commercial Code as legal, it is illegal and abusive for the consumer not to be informed of the economic scope of the clause. This is what has happened with these UCI mortgage loans when the applicable amortisation system was not even correctly specified in some of the mortgage contracts and many consumers were not informed diligently.
UCI sabia lo que hacia y les dio igual llevar a miles de familias a la ruina con sus hipotecas. Ahora me enfrento a ellos y no pienso pararme en ningún punto del camino. Voy a llegar hasta el final y voy a pelear por TODO lo que les corresponde a mis clientes. Los bancos ya no salen impunes de esto. #uci #hipotecauci #hipoteca #psoe #pp #vox #prestamo #prestamohipotecario #usura #deuda #fondobuitre #bancos
The possibility of claiming IRPH
These mortgage loans used the Mortgage Loan Reference Index, better known as IRPH, as an alternative to EURIBOR for the calculation of interest on variable-rate mortgages. This value is obtained by calculating the average interest rate of the banks that grant mortgages on a monthly basis, which some courts consider may be abusive in its application.
After an in-depth analysis of users’ claims, on 13 July 2024, the European Court of Justice (CJEU) issued a ruling on the nullity of IRPH clauses, thus correcting the Supreme Court and establishing that customers have the possibility of claiming, but that the Spanish courts have to decide on each case individually, analysing whether certain standards of transparency were met when signing the mortgage contracts.
In other words, to be able to claim IRPH, judges have to check whether the clause in the contract has been drafted in a way that is understandable for the customer and whether it fits with the information the customer received from the bank before signing the contract. On the other hand, they assess whether the consumer was offered the possibility of contracting the loan referenced to EURIBOR, explaining the differences between one and the other.
Declaran NULO el sistema de amortización de Uci. Aqui te explico porque siempre pagas más. Estamos preparando un paquete de miles de demandas contra Uci para que os devulevan todo vuestro dinero. Basta ya de usura! #hipoteca #prestamohipotecario #uci #bancos #prestamo #usura #psoe #pp #vox #dinero
An avalanche of consumer lawsuits
Although in the face of the claims of thousands of consumers affected by these mortgages, some Provincial Courts, such as those of Cádiz, Zaragoza and Asturias, had already ratified previous judgments of courts of first instance that condemned UCI for not having sufficiently explained the characteristics of these mortgages and for skipping the rules of informative transparency, declaring their amortisation system as null and void, the CJEU ruling opens the door to many more claims by affected consumers.
Thanks to this ruling of the Supreme Court, there is no specific deadline for claiming this abusive clause, since the claim can be filed at any time, even after the mortgage loan has been fully paid off. For this reason, some law firms have specialised in analysing these loans and determining whether the claim for abusive clauses is justified.
Once again, the banks will pay for having deceived their clients. Abusive practices have resulted in copious fines and penalties for these entities, as well as damage to their reputation, but which are periodically repeated in the face of a regulation and a sanctioning regime that continue to prove insufficient to guarantee consumer protection.
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