Last Thursday, the Spanish Congress approved a bill to create the Financial Client Defense Authority, a new body that will handle resolution management for complaints filed by customers against banks, insurers, investment firms, and other financial entities. When it becomes operational, likely next year, this institution is poised to change how consumer grievances are processed and addressed, a process that has seen notable shortcomings in recent years, including disputes over mortgage clauses that reached courtrooms.
What is the Financial Client Defense Authority?
The Financial Client Defense Authority is envisioned as a new public institution that will assume the outstanding claims submitted to the Bank of Spain, the National Securities Market Commission (CNMV), and the General Directorate of the Bank of Spain, as well as the Insurance and Pension Funds authorities. Beyond these areas, it will also extend its reach to matters not previously covered by existing bodies, such as consumer loans issued by unregulated lenders and certain crypto assets. It will also accept complaints that concern non-economic issues, for example the denial of a basic payment account where banks are obligated to make concessions for vulnerable groups, and the handling of mortgage-related issues. Individuals, freelancers, and small-to-medium enterprises can seek recourse here, while large corporations are not included.
Will their opinions be binding on institutions?
The most significant change is that the Authority’s decisions will be binding for the involved assets in cases with claims up to 20,000 euros. This marks a shift because the recommendations from the existing claims services, the Bank of Spain, CNMV, and insurers, have often been ignored by financial entities in substantial numbers. Of course, complainants and institutions must still observe the constitutional principle of effective judicial protection and may pursue civil court action if they disagree with the Authority. Still, the institution’s opinions will carry weight, backed by expert reports. The government believes this alignment will guide judges toward agreement with the Authority’s conclusions.
What will it cost to claimants and how will it be financed?
Access to the new body will be free for financial customers, who will not need to hire lawyers and can submit claims using standardized templates with support from volunteers. Financial institutions, however, will bear the financing burden. Initially, they would pay 250 euros per submitted request against them. That provision faced legal questions and was replaced by a system that mostly charged the institutions that opposed it. The operating costs will be distributed: roughly 40% based on each institution’s share of resolved receivables, and the remaining 60% allocated according to the number of favorable opinions in the plaintiffs’ favor, with distributions reflecting the total decisions that favored customers.
What kind of compensation and sanctions are foreseen for institutions and customers?
The Authority can require institutions to compensate those affected, fully or partially, in cases where compensation is warranted. In some instances, no compensation may be awarded. The range for claims goes from 50 to 2,000 euros. For non-compliance by board members or managers with binding decisions, penalties can reach 250,000 euros for minor violations or one million euros for serious offenses. For companies involved in serious cases, fines can reach up to 2% of turnover, capped at two million euros, while lighter infringements can incur up to 1% with a maximum of 500,000 euros. Customers who repeatedly submit clearly unfounded claims can face penalties of 200, 300, 400, or 500 euros depending on repeat offenses, and the Authority may assess a reputational penalty of 250, 500, 700, or 1,000 euros for those deemed to act in bad faith—based on recidivism.
When will it be published?
The bill will proceed to implementation after approval by Congress and then by the Senate. If the Senate suggests changes, it will return to Congress for final endorsement. It is anticipated that the Authority will receive parliamentary approval before the summer, with regulatory details about its internal procedures to follow from the Ministry of Economy. The appointment of the first president is slated for the fall, with Madrid as a probable headquarters. It is also expected to require around 250 staff. These steps indicate that the Authority may not begin handling receivables until the following year.