Credit & Guarantees

Credit & Guarantees
Montelongo Asesores deals with all aspects of Spanish Banking Law, understood as the normative, jurisprudential and doctrinal set that advises and regulates the operations carried out by banks and their clients.

We advise on factoring, leasing, renting, confirming, credit cards, mortgage and consumer financing, asset and commodity finance and foreign trade operations, and the provision of financial services at a distance, in solving any problem that can be related to loans, credits or guarantees, both individuals and companies.

We can help you with banking contracting, out-of-court claims for improper banking practices and in bankruptcy proceedings against banks for misappropriation of some traditional banking products and “toxic products” such as swaps or swaps interest rates, preference shares, subordinated debt, Santander securities, convertible bonds, multi-currency mortgages or abusive clauses in mortgage loans (for example, floor clauses) and derivatives, such as unlimited personal liability for mortgage loans, banking intermediation in the securities market, deposits or transactions subject to underlying securities and investment funds.

To mention some of the most frequent and most current cases, we will indicate the reference to the floor classifications of mortgage loans and the preferred shares and subordinated bonds.

In variable-rate home loan agreements, an interest rate linked to the Euribor plus a specific coefficient is agreed, but given the variability of this reference rate, which can be raised or lowered, it is stipulated that, despite fluctuations interest, the interest to be paid will never be less than an interest fixed at least (floor clause) or higher than another maximum interest (ceiling clause).

The floor clause is therefore the limit that protects the Bank from the possible falls of the Euribor and the ceiling clause the limit that protects the debtor from the increases of the own Euribor.

The problem of the possible abusive nature of these clauses has been raised, with a fundamental focus on the floor clauses, since the ceiling clauses are set so high that no case of Euribor rises has been raised to date.

The existence of floor clauses or limiting variations in variable interest can not be considered abusive in its own right, but can be so if certain circumstances:

It will be considered abusive, due to lack of reciprocity, if only a floor clause is agreed and not a ceiling of interest clause.
Likewise, the practice of agreeing on floor and ceiling clauses between which there is a notable disproportion will be considered abusive.
The problem that arises is when this disproportion can be considered to exist, since there is no specific pronouncement to fix it. The trend is to admit a rise well above the expected decline in interest rates.

Finally, the ground clause has been considered abusive when there is a lack of detailed and truthful information about the loan signed by the client in the binding offer of the loan.

The declaration as abusive of the clause soil will bring with it the nullity of said clause, so that the interest to pay will be at any time the Euribor plus the agreed coefficient, without application of the established minimum limit.

The case law of the Supreme Court of last year has been declaring the abusiveness of the floor clauses when there was not enough transparency in informing the consumer (STS May 9, 2013). In a ruling of June 12, 2013, the same Court clarified its decision confirming the abusiveness of the floor clauses, warning that the mere formalism of having read the copy of the mortgage loan to the client can not be considered sufficient information.

If this is the case, from Montelongo Asesores we can help you eliminate these types of clauses from your mortgage loan.

Preferred shares are securities issued by a company or banking entity that do not confer participation in its capital or voting rights. They have a perpetual character and their profitability, generally of variable character, is not guaranteed.

Their remuneration in the first year is usually fixed and, from the second, usually is referenced to Euribor (or some other type) plus a certain differential. This remuneration is conditional upon the entity issuing the participations obtains sufficient benefits.

It is a complex and high risk instrument that can generate profitability, but also losses in the invested capital.

The problem that has arisen in Spain with this product issued by some banks has been the lack of information that has been provided to buyers who, in many cases, were unaware that it was a risk investment.

In this way it can be considered that the bank placed the product artificially, without providing all the information to the consumer, which can make the contract null and void, and there are already many statements that corroborate this situation.

On the other hand, subordinated bonds are explicitly yielded fixed income securities, usually issued by credit institutions and large corporations, in which the collection of interest may be conditioned by the existence of a certain level of profits.

The problems that have arisen around them in recent times have the same character as the preferential ones.

Montelongo Advisers advises clients to recover the money that may have invested in this type of products without being fully aware of what he was acquiring.

On the other hand, Montelongo Asesores advises both individuals and companies on the types of guarantees or guarantees that aim to guarantee compliance with the obligations they have contracted with third parties (Public Administration in general, suppliers, etc.)

We can distinguish different types of guarantees or guarantees depending on the characteristics of the guaranteed obligation:

Preaval: This is the commitment acquired by the entity to formalize a definitive endorsement when it is needed by your company. Normally this type of guarantees is requested by the Public Administration to study the authorization of a deferral or split of a debt contracted by your Company.
Technical Aval: This type of guarantee guarantees the non-fulfillment of those commitments – not economic – assumed by the Company, such as participation in competitions and auctions, the correct operation of machinery sold, etc.

Economic-Commercial Guarantee: The objective of this guarantee is to guarantee payment in the purchase and sale of goods, taxes, as well as the return of amounts received by the Company for the sale of goods or provision of services.

Economic-Financial Guarantee: This guarantee guarantees the repayment of loans, loans or any other type of credit facility that the Company has or has been granted in any other financial institution.

The guarantees are products of a certain technical complexity and it is necessary to know well their characteristics and operation, and in this Montelongo Asesores can also provide their advice and support.