Bill to protect borrowers from abusive mortgage amortization clauses

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1. The bill would create new ways to end mortgage contracts with abusive amortization clauses, such as formulas with errors or that make it impossible to calculate payments, and would set out how to fix those contracts.
2. It defines which clauses are covered: the so-called REDAL clauses, those that fail to disclose payments under different interest rate scenarios, undefined financial jargon, and the interest formula errors listed in two annexes.
3. Lenders would have to set up a voluntary claim system for consumers and offer a mixed payment system covering interest and amortizing capital. They could not start civil proceedings for nonpayment if the payments made exceed the monthly interest.
4. If the bank rejects the claim, the consumer could appeal to the Bank of Spain (Banco de España), which would rule within two months with a binding opinion. If the bank does not respond within three months, the consumer's request would be deemed accepted.
5. Keeping these clauses after a resolved claim would be a consumer offense, and filing the request would automatically suspend lawsuits arising from that contract.

Who it affects

• People with mortgages containing abusive or unclear amortization clauses, such as increasing payment loans: They could claim to replace those clauses and choose the most favorable option
• Lenders: They would have to set up claim systems, offer mixed payments, and face penalties for keeping abusive clauses
• Bank of Spain (Banco de España): It would resolve disputes with binding opinions and could add new bias mechanisms to the list
• Ministries of Economy and Consumer Affairs: They would update the error tables and oversee proper application of the rule

Words worth knowing

Amortización (amortization)

Paying back part of the borrowed money, on top of interest, with each payment

Subamortización (under-amortization)

Paying off less principal than under the French system, leaving a larger debt

Sistema francés (French system)

The usual method for calculating mortgages with equal payments

Cláusula REDAL (Redito ad Libitum)

The bill's name for amortization clauses with errors or missing information

Dictamen vinculante (binding opinion)

A Bank of Spain ruling that both parties must follow

It summarizes the text as it was introduced. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries