Pamplona judge cancels two insurance policies linked to mortgages deemed ‘abusive’

Illegal property andalucia

The sentences condemn CaixaBank and BBVA banks with almost identical arguments: the lenders packaged up life insurance within mortgage offers, where the borrowers had to sign and pay for the product on the day the mortgage was accepted.

Jorge, a businessman from Pamplona, had read an article on the success of claimants fighting the floor clause (Cláusula Suelo). 

He asked his lawyer to look into the possibility of taking out a case against his bank and found that he was also within his rights to claim back the six thousand euros of life insurance linked to the loan. 

The bank was ordered to return the cost of the life insurance after the decision in July 2019. The judge ruled that it was both abusive and invalid to add costly products to a mortgage agreement. 

Life insurance with Bank loans

Linking life insurance with a loan has been a widespread practice for banks and lenders through the crisis years. The Pamplona rulings could benefit tens of thousands of clients who took out life insurance linked to a loan in the past. 

The practice of linked insurance is expressly prohibited in the new mortgage law linked to an EU directive. The new law allows lenders to offer customers “combined products”, but they must meet certain requirements, which ensure the product is not considered “linked”.

Jorge’s is the second case in which the Pamplona court ruled in favour of the borrower. The verdicts condemned CaixaBank and BBVA with almost identical arguments: that the lenders packaged up a life insurance policy together with their mortgage loan, with the payments added on as an extension to the credit. 

In both cases, the insurer belonged to the same group of companies as the bank. The judge ruled that each bank must pay the borrower the amount on the policy coverage still left and from the date, the claimant filed the complaint.

Proceedings against CaixaBank

The first case in Pamplona was brought against CaixaBank by debtor Cristina, who successfully recovered almost 9,000 Euros in life insurance that her husband was compelled to take out by the Caixa Bank in order to obtain a joint loan of 50,000 Euros, which was also secured by the re-mortgaging of their house. 

CaixaBank granted the loan to Cristina and her husband in 2015; automatically adding the single insurance premium to the total of the loan (taking it to 59,000 Euros). 

Cristina, who has a disability and is unable to work, saw the bank’s loan advertisement and, at the time, believed it to be their  “saviour”. 

However, when the economy improved and the couple calculated the insurance premium, they realised that it made up almost a fifth of the credit total. They took their case to Goldaracena Abogados and the firm demanded that the bank return their money. They initially refused, after which the couple took the claim to court and won. 

In February, the judge ordered the bank to return 7,151 Euros, representing the years of coverage yet to be consumed, plus legal interest. The uniqueness of this particular sentence is that the judge decreed the insurance was sold outside of legal practicalities.

CaixaBank tried to cover the practice by stating that the insurance had been taken out separately from the loan. However, Cristina’s lawyers were able to demonstrate that the insurance, contracted from Vida Caixa, had actually been paid at the time of the loan, and financed with an extension to the credit. In both cases, it was proved that the claimants were also paying interest on insurance, which is illegal in Spain. 

CaixaBank has declined to comment on the situation.

According to Manuel Pardos, president of Adicae, an association that defends consumers against the bank and saving bank misconduct, says the situation could affect:

“Not thousands or hundreds of thousands, but millions of borrowers,” who have taken out an insurance policy in good faith.”

“Such a thing can only be resolved by collective judicial action,” added Pardos, who recently announced that his association will study the matter with the intention of mediation in similar cases. 

In 2018, the Asturias College of Insurance Mediators of Asturias was involved in a class-action lawsuit in Gijón 

They alleged that the practices of banks in the promotion and selling of insurances were abusive to consumers. In addition, they claimed they had a knock-on effect to competition in the sector. 

However, the judge in Gijón deemed that the plaintiff, being a professional college, lacked “active legitimation” to raise litigations in defence of consumers and filed the procedure as “unable to investigate sufficiently into the matter.” The case has since been appealed and the Provincial Court of Asturias is considering their decision. 

A third case, issued by a Galician court in early 2017, also ruled that the insurance in question be cancelled due to lack of transparency, during the purchase. 

The case, which was reported in the ‘La Voz de Galicia’ newspaper, involved Banco Pastor, who chose not to appeal the sentence to prevent the case being heard in front of the Provincial court, and ultimately, the Supreme Court, with an unfavourable result against the bank. And with the potential outcome that many more claimants may take their cases to the courts. Manuel Pardos commented that banks tend to smooth over a court case when there is a danger of it ending up in the Supreme Court.

BBVA has not appealed the judgment, although the entity argued that insurance policies are “voluntarily” contracted by the client. It also states that all claims “are analysed on a case-by-case basis.” According to sources within CaixaBank, Jorge’s claim has been resolved, “with the insurance amount being paid and the case withdrawn”.

If you were sold a life insurance policy together with a mortgage by your lender, believing you had no option, then contact us for an appraisal of your situation. 

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