Spain: Parliamentary proceedings begin to create the Independent Administrative Authority for the Defence of Financial Customers

On April 5, the draft law for the creation of the Financial Customer Defence Authority was published in the Official Gazette of the Spanish Parliament.

1. INTRODUCTION

The current text being processed includes modifications introduced in the previous legislature´s parliamentary procedure and which were supported by the majority of MPs. These modifications include the financing of the new Authority by financial institutions and the possibility of appealing binding decisions before the civil courts, thus guaranteeing the protection of financial clients.

The Authority aims to resolve complaints against:

• Breaches of rules of conduct or financial practices and usages; and
• The unfairness of contractual clauses.

2. REGULATORY FRAMEWORK

This Draft Law sets up a system for the out-of-court settlement of financial disputes. This system will be divided in three tiers:

• Existing customer services and, where appropriate, customer ombudsmen.
• The Independent Administrative Authority for the Financial Customer Ombudsman (hereinafter the “Authority”).
• Judicial bodies.

This Authority will be independent and self-sufficient and will replace the current complaints services of the supervisory bodies of the Bank of Spain (hereinafter “BdE”), the National Securities Market Commission (hereinafter “CNMV”) and the Directorate General of Insurance and Pension Funds (hereinafter “DGSFP”).

3. SCOPE OF APPLICATION

The Authority will supervise financial institutions (i.e. individuals or companies subject to financial regulation) including, inter alia:

1. entities subject to supervision or registration with the BdE, the CNMV or the DGSFP, including those from other EU Member States or a third country operating in Spain either through a branch or cross-border;
2. entities subject to Law 22/2007 of 11 July 2007 on distance marketing of consumer financial services;
3. entities subject to Law 2/2009 of 31 March 2009 regulating the contracting with consumers of mortgage loans or credits and mortgage financing and intermediation services for the conclusion of loan or credit contracts;
4. entities subject to Law 16/2011 of 24 June 2011 on consumer credit contracts;
5. entities subject to Law 5/2019 of 15 March 2019 on real estate credit agreements; and
6. entities subject to Regulation (EU) 2023/1114 of 31 May 2023 of the European Parliament and of the Council on crypto-asset markets (hereinafter “MiCA”).

4. MAIN DEVELOPMENTS

The Project strengthens the protection and inclusion of financial clients. It provides for a simple, swift, and efficient way for the resolution of customer complaints, within a period of no more than 90 calendar days. The Authority will receive complaints submitted by customers, free of charge, in the banking, insurance and financial investment sectors. Likewise, a complaint shall be considered as such when it has been made by one or more customers against one or more financial institutions to restore or repair their interests or rights, when these may have been violated in the provision of a service, or in the contracting of a financial product.

This resolution system is configured as an alternative to resorting to the civil courts, on a voluntary basis for customers. However, it is mandatory for financial institutions once the customer has turned to the Authority.

In the event the customer decides to submit the complaint to the Authority, the first step in the complaint process is still to contact the customer service or ombudsman of the institution. Therefore, the customer will have a period of one year from the time he/she submitted the complaint to the institution to submit the complaint to the Authority once it has been rejected or one month has elapsed without having been dealt with by the institution's customer service department.

5. ACTIVE AND PASSIVE LEGITIMACY

The following will have standing to file complaints in the procedures regulated by the preliminary draft:

• Current and potential financial customers, whether individuals or companies and regardless of whether or not they are consumers. Large companies are expressly excluded as financial customers.
• Institutional investors when they are acting in defence of the interests of their clients.
• Associations and organisations representing the legitimate individual interests of customers recognised in the sectoral regulations on the conduct of financial institutions.
• Associations representing people with disabilities and their families.

All natural or legal persons subject to the sectoral regulations on the provision of financial services and the contracting of financial products with customers shall have passive legitimacy.

Likewise, once a decision has been issued to reject a complaint and it has become final, a fine of between €50 and €500 may be imposed on those who submit complaints when, repeatedly, such complaints have been rejected as unfounded, without affecting rights and interests, or for vexatious content.

6. DECISIONS

Decisions may or may not include economic content.

In the event the claim includes economic content, the Authority has the power to order the refund of the amounts unduly charged by the financial institution, including interest for late payment.

On the contrary, if the complaint has no economic content, the Authority's decision would assess the existence of a breach of customer rights according to applicable conduct of business rules / regulatory codes.

Furthermore, decisions can be binding or non-binding:

• Claims relating to breaches of conduct of business rules and unfair terms will be binding when the amount claimed is less than €20,000. In these cases, the financial institution is obliged to comply with the binding resolution within 30 working days of its notification. The Draft includes the possibility of extending the aforementioned period by an additional 30 working days, when due to complexity.
• Claims relating to breaches of conduct of business rules and unfair terms will be non-binding when the amount claimed is equal to or greater than €20,000. The institution shall have a period of 30 days from the notification of the unfavourable decision to accept or reject it. Likewise, where applicable, it must provide justification for having rectified the customer's situation or give reasons for its decision not to accept it.

Failure to comply with binding decisions of the Authority, as well as late or defective compliance with them, may be subject to sanctions imposed by the Authority.

In addition, the Authority's binding decisions will terminate the administrative procedure, leaving the possibility of challenging such binding claims before the civil courts open.

As for the non-binding rulings, they will have the value of an expert report in the event that either party decides to resort to the civil courts.

7. PRINCIPLE OF PERSONALISED SERVICE AND CARE

The Project contains a provision on personalised service and attention, both by the Authority and by financial institutions, especially for people with disabilities, people belonging to vulnerable groups and elderly people who wish to file complaints.

8. FEES

The Project foresees an annual fee for complaint resolution, payable by financial institutions, based on the total number of decisions issued against the financial institution. Likewise, it will be taken into account, regarding the total number of complaints, how many have been favourable to the financial customer.