Debt recovery costs
The Banco de España uses best banking practice principles to affect how banks pass on to customers the costs that they incur to recover unpaid debts (so-called “past-due notification fees”). This ensures that such fees are charged to customers with the utmost transparency, diligence and respect.
However, the entry into force of new and relevant regulations on banking conduct, along with judgment no. 566/2019, handed down by the Civil Division of the Supreme Court on 25 October 2019, prompted a review of these principles to ensure they are better adapted to banking contracts.
The rationale behind the charge - envisaged as a cost or surcharge under the new regulations - lies in the bank’s communications with the customer should they fall into arrears in order to reschedule the debt repayments, and thus head off situations that would be more damaging to both parties, such as early termination of the operation or legal action.
Hence, the Banco de España's new good practice principles aim to ensure that the costs generated by these communications are passed on:
1. More transparently, through:
- Their mandatory inclusion and specification in pre-contractual and contractual information, which must stipulate the following:
- The different channels of communication that would be employed and the associated cost.
- That the fee is incompatible with other penalties, insofar as the communications form part of payment rescheduling.
- The fee can only be charged once for each past-due balance, even if that balance remains outstanding in various settlement periods.
- Any thresholds beyond which the debt is exempt from the cost.
- Clear and simple communications with the customer, requiring the following:
- That the consumer is informed in advance of the cost that will be passed on, preferably in the communications.
- That the communications are respectful to the customer’s privacy, proportional to the duties of information and not excessive.
2. In due proportion, and accordingly:
- The amount is in keeping with the costs actually incurred by the bank.
- A suitable channel of communications is selected, with a cost proportional to the unpaid balance.
- Thresholds of unpaid debt that are exempt from these costs may apply.
Accordingly, banks are allowed to pass on these costs in the event of late payment, but must now do so in a more transparent and proportional manner. Should you have any queries, be sure to seek full information from your bank.
Find out more in our 2020 Complaints Report (in Spanish)