Spanish Equity Release Fiasco

“Capital Assurance”, among many other virtues, had one that stuck out over other products: it was a product that was sold to the clients on the basis that it followed a “cautious” investment strategy.

So when my client paid €1,000,000 to Danske Bank for safe custody, he blindly trusted the many undertakings made by the Danish entity: “IHT exemption”, “salary for life” and “Strategy: Cautious”, among others. The €1,000,000  is now reduced to €200,000, and with respect to the property that served as collateral, bank foreclosure judicial action is underway in the Courts in Coin.

The property happens to be the retirement Spanish home my client bought with his life time savings.

Documents

• Danske Bank ‘Cautious’ Investment Proposal (PDF)

admin Uncategorized Capital Assurance, Danske Bank

For the Head (or headless) of Danske Bank International, the killer product (International Capital Assurance) sold to their trusting customers was in no way a financial product but a benign insurance policy, and therefore did not have to be regulated by the Spanish financial regulator (CNMV), according to a communication sent to a Sunday UK paper. Then, supposedly, some hanky-panky Luxembourg law on the matter that nobody knows anything about would be applicable. Additionally, Danske Bank claims that the contract was signed in Luxembourg, when my client has never set foot on the tiny tax-haven.

Just short of a million euros have gone so far on some life insurance product…what would Your Honour think about this?

Antonio Flores Uncategorized Danske Bank, International Capital Assurance

Today, a criminal complaint has been lodged against a number of individuals, included Danske Bank’s CEO, on counts of deceipt by swindle, missapropriation and deceiptful publicity. Among the lies utilized by the consortium led by a local Danske Bank employee to induce a pensioner to part away with his life time savings on a product named Danske Bank Capital Assurance, we can name some of them:

1. Waiver of inheritance tax
2. Life time salary
3. Investment sold as “cautious”
4. Impossibility to lose the home
5. Full regulatory compliance (never, as they chose Luxembourg laws to be applicable to the contract, thereby flouting all Spanish consumer protection regulations).
6. Product sold as a life insurance

€1,038,000 were given to Danske Bank; Danske Bank now claims that they only have €200,000.

An injunction on the property has been requested to avoid it being sold at public auction or, depending on the market, repossesed by Danske Bank.

Documents

• Danske Bank Equity Release Case Criminal Complaint (PDF) – 3 Mb

Antonio Flores Uncategorized Danske Bank, Danske Bank Capital Assurance

I was hoping that the first installment of this theme was not so boring that you’d choose to miss the second one, but on re-reading it, it seems I may have utterly failed. I will therefore try to be concise now in respect of the second set of infringements all the equity release providers committed when “lending”, if that word can ever be used to describe this deceitful product.

Of the few cases that have reached the upper Courts, the one being discussed is essential for its application as case law could render all equity release contracts signed in Spain null and void, with the automatically-derived consequence that the mortgage loans would have to be cancelled, any costs borne by the almost destitute borrowers returned and a considerable compensation paid (here we need to consider the aversion of Spanish judges to embrace the Anglo-Saxon concept of compensation culture).

So if I wrote about the laws referring to the financial services legislation that were clearly flouted by Caja Rural (mind you, far less serious than those of the equity release providers!), now I will verse about those Spanish mandatory civil and consumer protection law provisions that were breached by the above savings banks (and incidentally disregarded as unworthy or inferior by the equity-release foreign lenders). The infringement of these laws made it clear to the Supreme Court that the only treatment for the controversial financial services contract was to apply the maximum penalty: nullity and voidness.

• Article 6.3 of the Spanish Civil Code: The acts against mandatory and prohibitive laws are null and void, unless they stipulate something different in case of contravention.

• Article 7 of the Spanish Civil Code:
  • Rights will be exercised in conformity with the requirements of good faith.
  • The laws do not protect the abuse of rights or the anti-social exercise of these. Any act or omission that, judging by the intention of its author, its object or by the circumstances in which it is carried out, surpass the normal limits of the exercise of a right, with damage for a third party, will be give right to a corresponding compensation and the implementation of measurers, judicial or administrative, that impede the persistence of its abuse.

• Article 5.5 of the General Contractual Conditions Act: Clauses will have to adjust to the criteria of transparency, clarity, concretion and simplicity.

• Article 8 of the General Contractual Conditions Act: A general contractual condition that contravenes to the detriment of the adhering party, or that go against mandatory and prohibitive laws are null and void, unless they stipulate something different in case of contravention.

• Article 10.1.a and c of the Consumer Protection Act (in force until the 16th of November 2007 but applicable for contracts signed prior to this date): Clauses, conditions or stipulations that are applied to the offer or promotion of products and services, and clauses not individually negotiated related to such product or services, will have to comply with the following requisites:
  • Concretion, clarity and simplicity in their writing, with the possibility of direct comprehension, without making reference to documents that are not provided simultaneously or prior to the exchange of contracts and those that will have to be inserted by mandate of the laws.
  • Good faith and fair balance between the rights and obligations of the parties, which is any event excludes the utilization of abusive clauses.

• Article 10.1.a and c of the Consumer Protection Act (in force until the 16th of November 2007): Any stipulations not individually agreed to that contravene the demands of good faith and that cause, in detriment of the consumer, and important imbalance of the rights and obligations of the parties to a contract will be deemed abusive. Particularly, the clauses referred to in the additional disposition of this act will be deemed as abusive. The abusive nature of a clause will be established considering the nature of the goods and services object of the contract and in relation to the concurring circumstances at the time of exchange of contracts, as in relation to other clauses within the contract.

• Article 25 of the Consumer Protection Act (in force until the 16th of November 2007): Consumers and end users will have the right to be compensated for the demonstrable damages occasioned by the use of the products and services, unless these are of the exclusive fault of the consumer.

• Article 26 of the Consumer Protection Act (in force until the 16th of November 2007), which is crucial: The actions or omissions of those who produce, import, supply or facilitate products or services to consumers and end users that harm or damage these, will give rise to the responsibility of the former, unless it is demonstrated that the mandatory regulations that are applicable to the product or service have been applied and observed diligently.

And I ask 2 simple questions:

• Did Rostchild, Danske Bank, Jyske, Nykredit (especially) and a few others comply with any of the mandatory Spanish regulations required for the protection of the consumer, principally?
• And what about if we assumed that the bankers’ lawyers had no idea of the applicable financial regulatory framework and so, had they known, one presuming these were banks law-abiding, they would have fully submitted to the laws of this country?

The answer is simple: NO, never, as if they had ever wanted to, they would have erased from their contracts the silly and inapplicable clause of submission to jurisdiction and applicable law to a foreign country!

In fact, Nykredit did not even register with the Spanish regulator but admitted and warned on their website, back in 2007, now conveniently erased (although not if you know how to dig out the information), the following:

“Please note that due to legal barriers, we currently only offer mortgage loans in France and Spain to Scandinavian retail customers”.

My clients are British…

Antonio Flores Uncategorized Caja Rural, Danske Bank, Jyske Bank, Nykredit, Rostchild