From One Scam to Another: How Banks in Spain Intend to “Compensate” 1.4 Million Fleeced Homeowners

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“Poisoned offers” to settle, backed by the government.

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

Spain’s biggest banks, it seems, will never learn — not even when the highest court of the land, the European Court of Justice (ECJ), rules against their dodgy practices.

The ECJ ruled just before Christmas that Spain’s major banks would have to refund all the billions of euros they had surreptitiously overcharged borrowers as a result of the so-called “mortgage floor-clauses” that were unleashed across the whole home mortgage sector in 2009 [A Nightmare Before Christmas for Spanish Banks].

These floor clauses set a minimum interest rate, typically of between 3% and 4.5%, for variable-rate mortgages, which are a very common mortgage in Spain, even if the Euribor dropped far below that figure. In other words, the mortgages were only really variable in one direction: upwards! While this is not illegal, most banks failed to properly inform their customers that the mortgage contract included such a clause.

The ECJ’s ruling was an emphatic victory for the almost 1.4 million borrowers who had been fleeced out of thousands of euros, many of whom have spent years trying to recoup the funds through Spain’s creaking legal system. Yet even now, the banks, many of which are struggling against a backdrop of negative interest rates and tightening margins, seem loath to part with the cash.

The president of Spain’s sixth biggest bank, Josep Oliu, today called the ruling against the bank’s floor clauses an “attack against the banks,” likening claimants to “roguish swindlers.” His bank, Sabadell, has been accused of pressuring its mortgage customers to sign a “pact of silence,” by which the customers, knowingly or not, pledge never to speak publicly about the conditions of their mortgage — not even to their lawyers — and in return the bank removes the floor clause from the mortgage, without reimbursing a single cent of what it owes.

Even today, with the law firmly on the borrowers’ side, “poisoned offers” continue to proliferate, warns consumer association Facua-Consumidores en Acción.




“It was entirely predictable that the same entities that had shafted consumers out of millions with their abusive mortgage contracts would try to do the same despite the fact that the European Court of Justice has ruled that they must reimburse absolutely all the money they have overcharged customers,” said Facua’s spokesperson, Rubén Sánchez.

Some banks are pressuring customers to sign documents seemingly designed to strip them of their rights to take the banks to court while reimbursing just part of the money they’re owed.

As usual, the banks have the Rajoy government firmly on their side. At first his coalition government considered passing a law that would have forced all the banks to reimburse all the money they had overcharged customers, as the ECJ had ruled. Unsurprisingly, such an approach was firmly opposed by the banking sector and was duly shelved.

The government then came up with a much more bank-friendly offer that included a voluntary, non-binding arrangement, which all big banks tend to love. However, the proposal was deemed too lenient by the coalition government’s “socialist” faction, which fears being seen by voters as coming down too softly on the banking sector, especially at a time when social-democratic parties are fading into irrelevance all over Europe.

In the latest offering, which could be enacted by Royal Decree as early as Saturday, the banks are not obligated to reimburse affected customers, but merely to enter into bilateral negotiation with them. The two sides will have a maximum period of three months (well over double the initial 36 days tabled) to reach a mutually satisfactory arrangement.

If, after that time, the customer is still unsatisfied, he or she can launch legal action against the bank. However, if in the end the amount awarded is less or equal to the amount initially offered by the bank, it is the customer that must cover the legal costs.

The problem with such an approach is that it treats the banks and their customers as equals, says Fernando Herrero, the secretary general of Adicae, an association representing financial end users. It’s a ludicrous proposition given the vast gulf in financial knowledge and expertise of the two sides, not the mention the fact that for the banks “negotiating means flagrantly deceiving the consumer, signing away his or her rights.”

The new proposed legislation has two main goals: to prevent the collapse of a major, cash-strapped bank (such as, say, this one) from the pressure of having to reimburse all its customers all at once, while also reducing the strain on Spain’s already over-burdened judicial system. According to Herrera, the government hasn’t even bothered to contact consumers or their representatives; “it only liaises with the banks.”

And it tells: the government’s new proposal will allow banks to repay customers not only in cash, which will be the most heavily taxed option available, but also by any other “equivalent means.” That apparently includes offering customers “financial products” (subordinated bank bonds, anyone?) of the equivalent value of the money owed, or the possibility of reducing the interest or principal payable on the mortgage, which will have a much less destructive short-term impact on the bank’s balance sheets.

Banks will also be able to offer to swap a customer’s variable mortgage (with floor clause) for a fixed rate one. The consumer association OCU has advised consumers to reject these types of offers, many of which include clauses preventing signatories from undertaking future legal action against the bank in question.

Whatever happens in the coming months, one thing is certain: regardless of what EU law may hold, the banks will do whatever they can to ensure that they refund as little as possible of the billions of euros they surreptitiously overcharged their customers. And they will have the government’s consent throughout.  By Don Quijones, Raging Bull-Shit.

The bank-bailout business rages on. Read…  UBS Warns: Spain’s “Most Italian Bank” Runs Out of Options




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  33 comments for “From One Scam to Another: How Banks in Spain Intend to “Compensate” 1.4 Million Fleeced Homeowners

  1. Martin Stewart
    Jan 14, 2017 at 11:56 am

    The banks will get their way as it’s the Rajoy government manipulation who caused this crisis
    As the share holder are top politicians then the matter goes even deeper

    • walter map
      Jan 14, 2017 at 1:45 pm

      “The banks will get their way as it’s the Rajoy government manipulation who caused this crisis”

      Sheer disinformation. You were as quick as you could be to deflect blame away from the banksters in order to further victimize and weaken the government. That kind of propaganda is a consistent feature of pro-corporatist, anti-government, anti-regulation comments here.

      The article clearly states that the government tried to get the banks to pay up and was slapped down by the banks. That shows you who’s boss here, and it’s not the government.

      Governments don’t corrupt themselves my man. That’s what corporatists do.

      • Gary
        Jan 14, 2017 at 6:21 pm

        Good point Walter, but this article clearly makes the EU seem like the good guy and the local government complicit.

        Yes “the government tried to get the banks to pay up and was slapped down by the banks”, but I think the point is that people will be suspicious of how hard did the government really try? After all, who at the end of the day has the firepower to enforce?

        • walter map
          Jan 14, 2017 at 6:58 pm

          “I think the point is that people will be suspicious of how hard did the government really try? After all, who at the end of the day has the firepower to enforce?”

          Of course the government wasn’t going to try very hard. It’s been corrupted by the banks.

          Just who do you suppose is corrupting the Spanish government, the tapa stands?

  2. BOB
    Jan 14, 2017 at 1:11 pm

    mmm Sabadell, the bank that charges premium rate on calls to there help line,even when the problems the banks.
    mmm now the Spanish government does not want to take any notice of a EU court ruling.
    the funny think is the UK which us getting out of the EU ,would say.. ok this is the law we will act on it.AND MAKE THE BANKS PAY UP.
    SHAME FRANCE SPAIN ECT ECT DOES NOT .
    and they wonder why the UK people voted OUT.

    • H
      Jan 14, 2017 at 1:45 pm

      Uk voted out because most people have no idea about the GOOD aspects of the EU such as improved legal rights…Nigel Fareage was not big on telling people the other side of the story

      • Bob
        Jan 14, 2017 at 5:13 pm

        Your correct about that the get us out lot only told the British people untruths But legal rights are not worth a Dam if the likes of Spain don’t take any notice The other thing I thought of is. If the Spanish government want to make this new law in contravention of EU law courts They have tog the king to sign it. Would he want to be in contempt of court a EU court at that. If he does we may as well all pack it up as the E U is finished

    • walter map
      Jan 14, 2017 at 2:06 pm

      “and they wonder why the UK people voted OUT.”

      Brits voted out because they’re sick of getting pillaged by the EU banksters and are willing to take their chances with British banksters, despite the threat of an economic downturn from – who else? – the EU banksters.

      As it happens, the Financial Industrial Complex has become so powerful that there is no longer any way to rein them in without generating an organic economic downturn – and that doesn’t include the ongoing threat of an economic crash if they don’t get their way.

      It’s common knowledge in certain circles that the reason Obama bailed out the banks, instead of prosecuting them, is because the banks were prepared to crash the U.S. economy far more severely if he didn’t. It’s a hostage situation, deliberately engineered years ago: either you let them pillage the economy into periodic recessions or they’ll crash it into a long-term depression.

      No politician will risk having a depression on their hands. It makes them unpopular and the banks win anyway.

      • Edward E
        Jan 15, 2017 at 9:51 am

        Walt, personally I think the certain circles have it a little wrong, he sold us out. Obama is a man who was desperately yearning to be embraced by the nation’s political and financial elites. He rushed to Washington DC to help secure the Bushie bailouts. Instead of meeting with the victims of Wall Street predators or their advocates, such as Elizabeth Warren and Ralph Nader, he partied with the brain trust of Goldman Sachs and schmoozed with high society K Street corporate lobbyists.

  3. Tom Kauser
    Jan 14, 2017 at 1:23 pm

    More stress tests

  4. robt
    Jan 14, 2017 at 1:30 pm

    “… possibility of reducing the interest or principal payable on the mortgage”
    What’s wrong with that? No free money for ‘mental distress’ ?
    For the rest, I’ll just repost:
    I am usually no friend of the Banks, but …
    The traditional spread on interest was usually about 3%, so even if bank access to funds was 0% – 1 1/2%, you would expect to pay 3% to 4.5%. Apparently also, even if the bank drew attention to the clause, they are held to the principle that they can tell the future on interest rates.
    This is nothing but buyer’s remorse and make-work for ambulance chasers, who presumably will get their 33% cut of the award.
    Compensating aggrieved mortgagors should be an interesting exercise – calculating multiple periods of interest rate fluctuations and the ‘overcharge’ applicable to each period. Also to be considered is whether all the people who defaulted on their mortgages, thus causing the insolvency of the banks will get compensation for the period they were listed as the mortgagor.

    From the perspective of jurisdiction and sovereignty, I am usually concerned about the powers of the EU court over the individual states, but in this case a comparison could be made with the Federal Supreme Court in the States and State Supreme Court rulings. Typically if the plaintiff loses in a State, they appeal all the way to the Federal Supreme Court.

    • walter map
      Jan 14, 2017 at 1:51 pm

      “I am usually no friend of the Banks, but …”

      You’re a ‘friend’ of the banks. Your argument is all about blaming the victims and getting the banks off the hook for a million counts of fraud. Where have we heard that before?

      Don’t worry about the banks. Other articles here have clearly shown they’ll get bailed out and bailed in by their victims if their chicaneries turn out to be unprofitable, whopping bonuses included.

    • MC
      Jan 14, 2017 at 4:18 pm

      I am not an economic guru (and given Paul Krugman’s recent Twitter meltdown I am grateful for that) but there exists an economic phenomenon called “spread compression”.
      To cut a long story short when LIBOR (or EURIBOR or any other benchmark rate for bank capitalization) goes below its “historical” range, the spread you talk about goes down and keeps going down.
      For example EURIBOR 12 was historically around 3% (3.11% if my leaky memory serves me right) before the ECB started hitting it with a blunt instrument. Back then the average mortgage spread for “Club Med” banks was 4% before paying taxes, ammortization etc.
      Right now EURIBOR 12 is -0.09%. Average mortgage spread for the same banks is now 2.04%, again before taxes, ammortization etc.

      In short for banks to make as much money as before on mortgages, the Italian and Spanish housing markets should be twice as big as they were in 2007 and with the same percentage of people opting for mortgages over all cash. Or just as big and with twice as many mortgages.

      • nhz
        Jan 14, 2017 at 4:43 pm

        Of course, part of the spread comes from rates on savings accounts which cannot go (much) below zero as long as we still have cash, otherwise the whole house of cards would collapse.

        So yes, the spread has collapsed even though EU savers are getting robbed and banks are hurting (except maybe those with huge debts?). People are paying the lowest mortgages rates ever and they are still complaining that rates are ‘too high’. In Netherlands the cost of ‘owning’ a home is now 2-4x lower on a monthly basis than renting an equivalent home and you would think that homeowners are happy but no, they deserve even lower rates! Forever!! Morons :-(
        Morons :-(

    • nhz
      Jan 14, 2017 at 4:37 pm

      Mostly agree with robt, also because if all these ‘victims’ have their way it will be EU taxpayers paying the price, not the bankers or the RE gamblers who purchased homes they often could not afford. Most of these ‘victims’ paid less interest than they expected when they signed the contract, what’s wrong with that?

      Much of the blame rests on Mario Draghi and his mob, who lowered interested rates to completely ridiculous levels that no sane banker could have expected. Although much is rotten in Spanish politics, I don’t think one should blame Spanish politicians for this mess.

      In Netherlands quite a few ‘elite’ homeowners have interest-only mortgages at Euribor + 0.5% (these are not standard mortgages, they are often backed by other capital so there is no risk for the banks, it is mostly a tax evasion trick). Some of those mortgages have gone to effective negative rates, and the same goes for some leveraged business contracts related to Euribor. These cases are in the courts now. It’s obvious that even 5 years ago the lawyers who made the contract never expected negative rates. Big money for the ‘ambulance chasers’ indeed.

      We have somewhat similar experience in Netherlands with Legiolease from Dexia, something that was presented as kind of a savings account that could make big money but in reality it was a scheme for buying stocks with leverage, with borrowed money. Initially (when the stock market went up) people made lots of money but after 2001 things got ugly and many people owe Dexia big money. About 5-10% of the population participated and the courts have been working on this for over ten years now, still no final solution available. Politics is messing with it all the time, trying to select their favorite ‘victims’ that need to be bailed out by other victims (of course, the banks will never pay). Just like with the housing market, most ‘victims’ were brilliant on the way up and splurged on bigger homes, nice vacations, fancy cars etc.; on the way down they “have been conned” and need to be bailed out by someone else which in the end probably means savers, taxpayers etc.

      people never learn, they really need some hard lessons to grow up.

      • Chicken
        Jan 14, 2017 at 5:36 pm

        “it will be EU taxpayers paying the price, not the bankers or the RE gamblers who purchased homes they often could not afford.”

        Soros is probably lurking behind the curtain.

        This reminded me of walking Via Delorosa, wondering what people were thinking and questioning their motivations.

        While sitting here contemplating the many ways childish liberals are planning on disrupting our upcoming inauguration.

      • walter map
        Jan 14, 2017 at 6:46 pm

        Those poor, poor bankers. They’re just helpless when they’re up against those tired suburban wage slaves.

        Really, who do you think you’re kidding?

        • nhz
          Jan 15, 2017 at 6:09 am

          you are twisting my argument.

          It’s the bankers, the politicians, the lawyers and the ‘mortgage victims’ against the sane citizens who had no part in this mess. If this cabal wins, most of the spoils will go to lawyers and politicians, the victorious ‘victims’ will probably get some breadcrumbs while EU taxpayers and savers will be fleeced to the max ‘for the benefit of the Spanish mortgage victims’. That’s how it always works.

        • walter map
          Jan 15, 2017 at 7:57 am

          “you are twisting my argument.”

          No, I untwisted it.

  5. Bob
    Jan 14, 2017 at 6:29 pm

    As I said in a reply. For Spain to action a new law in defiance of a EU court judgement the king must sign it. Would he do that and be in contempt of court We will see

    • Chicken
      Jan 14, 2017 at 8:27 pm

      Hopefully the King has not been bought and paid for by Soros.

      If Soros demanded, Hilary would happily launch nuclear powered cruise missiles against Putin powered by uranium hexafluoride and dimethylmercury.

      • walter map
        Jan 14, 2017 at 9:38 pm

        I’m disappointed that our host allows such vicious and patently dishonest off-topic smears.

        • Raymond Rogers
          Jan 14, 2017 at 9:57 pm

          Would you stop spamming the comments section like you own the place. We get it, you hate buisiness of any sort, hate Trump, love the Dems, and think big government and a massive amount of regulations are swell.

        • walter map
          Jan 14, 2017 at 10:17 pm

          Hi Ray!

          “Would you stop spamming the comments section like you own the place.”

          In point of fact, I don’t spam the comments section like I own the place. That would be ‘chicken’.

          “We get it, you hate buisiness of any sort”

          You’re mistaken. I run a couple of businesses myself.

          “. . . hate Trump . . . ”

          I’m not a hateful person and don’t hate Trump. I just think he’s the wrong guy for the job.

          “. . . love the Dems . . . ”

          Hardly. Some of them are as bad as you pubs. Unfortunately they’re the only ones standing between you corporatists and disaster.

          ” and think big government and a massive amount of regulations are swell.”

          Wrong again. I think government should be reduced by rolling back the doubling of the MIC over the last few years. And your country’s problems clearly show that your regulatory structure has been corrupted into gross ineffectiveness.

          I think you’re just angry because I’m so effective at exposing corporatist corruption for what it is. Try not to blow any more gaskets.

        • rvette454
          Jan 15, 2017 at 12:02 am

          Walter, I have to say your outlook is much clearer then many. Others, stand behind the cookie cutter life, they have been groomed for, and reject anything out side their norm. How others can not read, see and relate to monopoly’s in history’s past and not see the same conditions today is beyond believe. They, figuratively have the banter and look down pat in my rural world, wrapping the rhetoric with religous and personal freedom, but pale in genuine empathy, remorse or hope. They can stand down more easily then many who are freer.

        • SoberMoney
          Jan 15, 2017 at 1:12 am

          Walter, engaging the Trump / Faux News cult followers is like trying to reset your internet router when you don’t have electricity.

          Let them obsess over their dark delusional conspiracy fantasies about Soros, Clinton, Black Lives Matter etc. It is nothing more than Fox News brainwashing and desperation problem solving.

          Sane political analysis involves human compassion and taking responsibility for one’s own actions. The Trump cultists are generally incapable of both.

          Don’t waste your time (even though it is fun watching them react like they always do, with anger, bullying, and fear.

      • nhz
        Jan 15, 2017 at 6:11 am

        would be difficult to bribe the King with so much dirt about the Spanish crown already out in the open ;-)

  6. rvette454
    Jan 15, 2017 at 12:19 am

    Not to much off subject, I hope, but where I presently live, a rural setting in Indiana, no politician wants to bring up any thought of any referendums to increase the budget for basic safety measures. No additional E.M.T’s or ambulances. People die waiting or are seriously impaired, as in the case of strokes, because there is no ambulance available at times. The first responders, as they are called are not E.M.T.’s and do not have the skills and can not suggest private transportation to those waiting on a ambulance. But, asking many in the community and the response is similar, “we can’t afford it” and “why give the government more of my money to waste” so when you are in need of ambulance care you are billed for it, completely. On top of possible loss of income and additional costs, our community makes you pay for your unfortunate loss. But, heck taxes are low and government is out of your hair, and the poorer and sick get poorer.

  7. Rocky
    Jan 15, 2017 at 12:30 am

    It doesn’t really matter where in the world it is now, corporate rights are almost always valued more than citizen or consumer rights.

    Every now and then we see a semblance of administrative justice coming from a government entity – one that hasn’t been totally co-opted by the political corruption of corporate superiority.

    Maybe that’s what we’re seeing in Spain with this ruling. But of course the ending resolutions are apparently still being determined by corporate bullying.

    Still, we tend to see more citizen rights still in effect in Europe where some form of social equity still exists. The role of government to protect its citizens from corporate abuse sadly is a lost value in America – with the current exception of Bernie Sanders and his progressive politics.

    At least the ruling in Spain give homeowners some hope, in spite of the toothless enforcement.

    Corporatist ideologues will always end up blaming socialist policies and other scapegoating nonsense as the cause of Europe’s problems. And there may be some truth in that analysis.

    But more often greed and corruption is the real cause – greed from corporate power and corruption from universal human weaknesses such as fear and self-loathing.

    To be sure, human weakness is much more prevalent these days than ever. We see it clearly with the desperate appeal of authoritarians (Trump, Putin, Pen, etc.) who conveniently blame powerless citizens for the economic decision making of the dominant ethnic group.

    • nhz
      Jan 15, 2017 at 6:14 am

      “Still, we tend to see more citizen rights still in effect in Europe where some form of social equity still exists.”

      That is not my experience. More rights and subsidies for the parasites at the bottom of the pyramid yes, to keep the voter base happy; less rights and more taxes for the disappearing middle class or Europe.

      • walter map
        Jan 15, 2017 at 7:50 am

        Crocodile tears for the victims of the avarice of wealth. How disingenuous. The articles on this blog clearly show that it is not the relief of the poor which is causing the disappearance of the middle class.

        In the history of humankind it was a great advance towards civilization when the strong consented to eat the weak by due process of law. Now that civilization is ending the strong are withdrawing that consent, and proceed to gorge themselves without restriction or remorse.

        The Eskimos believed that the Europeans had come to Greenland to learn manners and virtues, seeing how they lacked them.

        • Chicken
          Jan 15, 2017 at 6:22 pm

          ” Now that civilization is ending”

          I guess that means you must’ve been a heavy contributor to the Clinton Global Initiative.

      • Rocky
        Jan 15, 2017 at 12:01 pm

        To me the nuance here is the difference between corrupted corporate supremacy like in America and corrupt bureaucratic dysfunction like in Europe.

        All of our analyses is going to be faulty with quick black and white thinking.

        I can’t speak clearly to Europe but in America we are so divided with rigid ideologies we are screwed with both the totalitarian Republican elitism on the on hand and the complacent in-denial elitism of the corporate Democrats.

        Europe has been through two devastating wars. So they understand universal health care and some other basic human rights.

        Americans are still pissing in the wind with our corrupt lobby money insurance corporate welfare health care system. Hell, even faux progressive Cory Booker is owned by the insurance sector.

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