In chapter eight, the Alicante Provincial Court nullified a mortgage-related clause. A married couple from Alicante had purchased a life insurance policy with a single premium of €4,600 that was folded into their mortgage. The court viewed this practice as abusive because the information given to customers about the product and its cost was insufficient. The premium was added directly to the loan balance, and there was no evidence that the policy served as a legitimate deposit or bank commitment from the contracting parties.
The court upheld the decision of the Court of First Instance No. 5, ruling against the appeal filed by Banco Santander. The bank had stated it would not challenge the ruling. The decision obliges the bank to reverse the charged premium, totaling €4,640.23, minus installments already consumed. In other words, the amount corresponding to the years in which the insurance was active must be returned, as the policy was described as a loan amortization on death. Additionally, interest must be refunded for the time the couple paid that amount because it was included in the mortgage to finance the loan, which effectively increased the loan from €69,000 to €73,600. The attorney from Unive Abogados, who led the case, noted that the policy payout was transferred directly to the insurer, Sandra Nesteckyte, at once.
The ruling emphasizes that the decision does not provide more than an immediate transfer order from the account funding the loan to the borrower, which violates transparency requirements by hiding that a significant premium was financed through the loan itself and thus raised overall costs.
The judgment also notes that it has not been shown that the lender provided additional credit or pre-contract information about the premium and the associated insurance. It states that unless the insurance contract aligns with a lender’s request, it should be treated as a consumer protection matter, suggesting the presence of an unsolicited supplementary service and invoking a presumption of abuse under Article 89.4 of the TRLGDCU (the consolidated text of the General Law for the Defense of Consumers and Users).
The court ultimately concluded that the borrower did not fully understand the real economic burden entailed by the contract, signaling a failure in disclosure and informed consent.
European Justice addresses the presence of potentially abusive clauses in an already enforced mortgage
As explained by representatives of Unive Abogados, this kind of single premium insurance is frequently used by some lenders to condition the loan on the purchase of the insurance, without providing clear information about costs or options. While banks may claim that the process requires little effort from the borrower, the practical effect is a higher ongoing cost tied to the loan. In this case, the premium was €4,640, and there are examples where amounts reach as high as €10,000 to €15,000, depending on the loan size and the borrower’s personal situation, according to Nesteckyte.
There are already several Spanish courts that have struck down mortgage insurance clauses that pressure consumers into accepting coverage. Some lenders have stated they will not appeal the state court decision, while consumer protection groups push for greater scrutiny of how such insurance is offered alongside mortgages.