Order EHA/2899/2011 on Transparency and Client Protection in Banking Services (Error Correction)

OFFICIAL STATE GAZETTE
No. 261 Saturday, October 29, 2011 Sec. I. Page 113242
I. GENERAL PROVISIONS
MINISTRY OF ECONOMY AND FINANCE
17015 Order EHA/2899/2011, of October 28, on transparency and client protection in banking services.
Title I. General Provisions
Article 1. Purpose.
Article 2. Scope of application.
Article 3. Commissions.
Article 4. Interest rates.
Article 5. Advertising.
Article 6. Pre-contractual information.
Article 7. Contractual information.
Article 8. Communications to the client.
Article 9. Adequate explanations.
Article 10. Advice.
Article 11. Formal requirements and highlighted information.
Article 12. Linked banking services.
Article 13. Duty of diligence in execution of orders and correction of errors.
Article 14. Sanctioning regime.
Title II. Deposits.
Article 15. Demand deposits.
Article 16. Term deposits with principal guarantee.
Article 17. Advertising and contractual documentation.
Title III. Credits, loans, and payment services.
Chapter I. Responsible lending.
Article 18. Solvency assessment.
Chapter II. Rules relating to mortgage credits and loans
Section 1. General provisions.
Article 19. Scope of application.
Section 2. Pre-contractual information.
Article 20. Guide to Access to Mortgage Loans.
Article 21. Pre-contractual Information Sheet.
Article 22. Personalized Information Sheet.
Article 23. Binding offer.
Article 24. Additional information on interest rate risk hedging instruments.
Article 25. Additional information on floor and ceiling clauses.
Section 3. Interest rates.
Article 26. Variable interest rates.
Article 27. Official interest rates.
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Article 28. Indices and reference rates applicable for the calculation of market value in compensation for interest rate risk.
Section 4. Contractual document and execution act.
Article 29. Contractual documentation.
Article 30. Execution act.
Section 5. Annual Percentage Rate of Charge (APRC).
Article 31. Calculation of the Annual Percentage Rate of Charge.
Section 6. Reverse mortgage.
Article 32. Transparency regime.
Chapter III. Rules relating to consumer credits.
Article 33. Transparency regulations for consumer credits.
Chapter IV. Rules relating to payment services.
Article 34. Transparency regulations for payment services.
Single Transitional Provision. Transitional regime for other indices or reference rates.
Single Repealing Provision. Repeal of legislation.
First Final Provision. References to transparency regulations in Law 2/2009, of March 31, regulating the contracting with consumers of mortgage loans or credits and intermediary services for the celebration of loan or credit contracts.
Second Final Provision. Modification of Order EHA/1608/2010, of June 14, on transparency of the conditions and information requirements applicable to payment services.
Third Final Provision. Development powers.
Fourth Final Provision. Competential title.
Fifth Final Provision. Entry into force.
Annex I. Pre-contractual Information Sheet (FIPRE).
Annex II. Personalized Information Sheet (FIPER).
Annex III. Pre-contractual Information Sheet (FIPRE) for reverse mortgages.
Annex IV. Personalized Information Sheet (FIPER) for Reverse Mortgages.
Annex V. Calculation of the Annual Percentage Rate of Charge.
I
Transparency in the functioning of markets has historically been one of the most pursued objectives by the legal framework of any economic sector. The correct allocation of resources cannot occur authentically, nor can full competition be guaranteed, if there is no adequate protection framework for clients that, by limiting the effects of information asymmetry, allows them to adopt their economic decisions in the most convenient way. Within the financial sector, setting aside the protection derived from the existence of deposit and investor guarantee funds, the defense of the clientele has traditionally pivoted on two axes. On the one hand, the prudential and solvency regulations of credit institutions, although primarily oriented towards market stability, have a direct and very valuable effect on client protection. In this sense, entities are subject to a professional statute among the most demanding provided for in the entire legal system, which strongly favors their solidity and reliability within financial transactions. cve: BOE-A-2011-17015

OFFICIAL STATE GAZETTE
No. 261 Saturday, October 29, 2011 Sec. I. Page 113244 On the other hand, financial legislation also features a special system for the direct protection of the client. Apart from the protection of users of investment and insurance services, which possess very complete and systematic regulations, and beyond general consumer defense, the protection of banking service clients aims to mitigate the effects of information disadvantage, fostering transparency in entity-client relationships throughout the entire banking negotiation process. This transparency regulation has been implemented in Spain through the development of Article 48.2 of Law 26/1988, of July 29, on the Discipline and Intervention of Credit Institutions. This provision, with the express purpose of protecting the legitimate interests of the clientele of credit institutions, and without prejudice to freedom of contract, granted the Minister of Economy and Finance the power to issue the necessary rules to safeguard the aforementioned relationships between credit institutions and their clientele and lead them to maximum transparency. The first regulatory development that gave content to the aforementioned regulation took place more than two decades ago. The Order of December 12, 1989, on interest rates and commissions, rules of conduct, information to clients, and advertising of credit institutions is, since then, the general framework for the regulation of essential issues regarding retail financial transactions, such as commissions, interest rates, or communications with the client. Shortly after, the same regulatory power was used to address the regulation of mortgage lending, the quintessential retail banking service. In this sense, with the objective of facilitating the client's perfect understanding and financial implications of the mortgage loan contract, in the mid-nineties, the Order of May 5, 1994, on the transparency of the financial conditions of mortgage loans entered into force. Since then, financial transparency legislation has continued to advance in certain sectoral areas. This is the case of Law 16/2011, of June 24, on consumer credit contracts, dedicated to this specific banking service; Law 2/2009, of March 31, regulating the contracting with consumers of mortgage loans or credits and intermediary services for the celebration of loan or credit contracts, which extends the transparency regime to other financial intermediaries other than credit institutions; and in the regulatory range, Order EHA/1608/2010, of June 14, on the transparency of the conditions and information requirements applicable to payment services, and Order EHA/1718/2010, of June 11, on the regulation and control of advertising of banking services and products. At this point, it is clearly observed how the common or general Spanish transparency regulation (Ministerial Orders of 1989 and 1995 and Circular 8/1990 of the Bank of Spain developing them) has become unjustifiably obsolete. On the one hand, due
to the aforementioned advances in sectoral regulation undertaken in areas such as consumer credit, payment services, or advertising. And, on the other hand, due to the enormous transformation that the marketing of banking services has experienced from the early nineties to the present. Transformation closely linked to circumstances such as the enormous expansion of credit, especially mortgage, the increase and complete generalization of retail access to banking services, the appearance of new financial instruments of growing complexity, the spread of the use of new technologies in client relationships, and, no doubt, also due to the profound crisis of the financial sector in recent years. II Within the aforementioned background, Law 2/2011, of March 4, on the Sustainable Economy, sought to make a substantial advance in banking transparency. Its contributions and novelties are articulated in a double sense. On the one hand, a new approach to regulatory intervention has been introduced into our legal system, which, despite its relevance in the international debate, remained alien to our Law. This is the promotion of responsibility in lending. To this end, the aforementioned law has established not only the obligation to carry out an adequate assessment of the solvency of clients (a practice, by the way, completely widespread among Spanish credit institutions), but also the need to actively promote a whole range of practices, aimed at guaranteeing the responsible granting of loans. And on the other hand, the aforementioned law has expressly empowered the Minister of Economy and Finance, granting a period of six months, to approve the necessary rules to guarantee the adequate level of protection of users of financial services in their relations with credit institutions. The present Order therefore comes, in use and fulfillment of the previous authorization, to meet a triple objective. On the one hand, to concentrate in a single text the basic transparency regulations so that, in a systematic and illustrative manner, the codification of the matter itself improves its clarity and accessibility for the citizen, overcoming the current regulatory dispersion. Secondly, the rule seeks to update the entire set of provisions regarding the protection of the banking client, with the object of rationalizing, improving, and increasing where absolutely necessary, the transparency and conduct obligations of credit institutions. Thus, in line with reforms carried out in much of comparative Law, our country improves requirements in matters such as information on interest rates and commissions, communications with the client, (pre)contractual information, linked financial services, etc. The Order also includes an express mention of advice, with the aim of guaranteeing that the provision of this banking service is always carried out in the best interest of the client, and adequately assessing their situation and the set of services available in the market. In this way,
such service is distinguished from the direct marketing by entities of their own products, an activity subject to the general regime of transparency and adequate explanations. Finally, electronic media are definitively recognized as mechanisms equivalent in all respects to traditional paper support, in the relationship of credit institutions with their clients. And, finally, the rule develops the general principles provided for in the Sustainable Economy Law with regard to responsible lending, so that the corresponding obligations are introduced for the Spanish financial sector, to the benefit of clients and market stability, to improve prudential levels in the granting of this type of operations. To this end, a system based on solvency assessment has been designed, which aims to value the risk of default for the purposes of the possible granting of a loan, and whose development should not, in any case, constitute a barrier to credit access for the population, but a legal stimulus for healthier and more prudent behavior of entities and clients. Additionally, the rule addresses other substantial areas among which the following three stand out. First, the specific development of the mortgage loan transparency regulation for the acquisition of housing is addressed to replace the previous 1994 regulation. The new transparency system, in line with the already approved consumer credit regulation and with the regulation projected in the European scope, is designed on a series of unified information requirements of both pre-contractual and contractual nature. Additionally, other more specific tools are added, such as the dissemination of an informational Guide adapted to this product, which will allow for deeper financial education of clients. Transparency is also specifically reinforced regarding certain services: floor or ceiling clauses and interest rate hedging financial instruments. The existence of both services linked to mortgage loans was already provided for in the legal system, and this Order merely reinforces to the maximum the transparency obligations and dissemination of relevant information that the client must weigh before contracting. In the same framework, and with regard to reverse mortgages, the Order executes the development of what is provided for in the first additional provision of Law 41/2007, of December 7, which modifies Law 2/1981, of March 25, on the Regulation of the Mortgage Market and other norms of the mortgage and financial system, on the regulation of reverse mortgages and dependency insurance, and by which a certain tax norm is established. And, finally, the rule also regulates what will be official interest rates according to the authorization included in the aforementioned Article 48.2 of Law 26/1988, of July 29, on the Discipline and Intervention of Credit Institutions. The modification responds in this point to the need to adapt reference rates to an integration of markets on a European and national scale that is
increasingly greater, and to the need to increase alternatives for the choice of rates, while adjusting these to the real cost of obtaining resources by credit institutions. The present Order is issued in use of the authorizations expressly conferred on the Minister of Economy and Finance in Articles 29.2 of Law 2/2011, of March 4, on the Sustainable Economy, 48.2 of Law 26/1988, of July 29, on the Discipline and Intervention of Credit Institutions, and in the first additional provision of Law 41/2007, of December 7, which modifies Law 2/1981, of March 25, on the Regulation of the Mortgage Market and other norms of the mortgage and financial system, on the regulation of reverse mortgages and dependency insurance, and by which a certain tax norm is established. In virtue thereof, in accordance with the Council of State, I order:
TITLE I
General Provisions
Article 1. Purpose.
The purpose of this ministerial order is to guarantee the adequate level of protection of clients of credit institutions, through the implementation of transparency measures in the provision of banking financial services.
Article 2. Scope of application.

1. This Order shall apply to banking services directed to or provided to clients, or potential clients, in Spanish territory by Spanish credit institutions or branches of foreign credit institutions. For these purposes, clients and potential clients shall be understood to be natural persons.
   Likewise, for the purposes of this Order, banking services shall be understood to be those comprising cash services, the collection of repayable funds, especially deposits, the granting of credit and loans, payment services, and other activities included in Article 52 of Law 26/1988, of July 29, on the Discipline and Intervention of Credit Institutions, except those mentioned in letters h) to m).
2. The following are excluded from the scope of this ministerial order: services, operations, and activities included within the scope of Law 24/1988, of July 28, on the Securities Market, Law 35/2003, of November 4, on Collective Investment Institutions, the consolidated text of the Law on the Organization and Supervision of Private Insurance, approved by Royal Legislative Decree 6/2004, of October 29, the consolidated text of the Law on the Regulation of Pension and Fund Plans, approved by Royal Legislative Decree 1/2002, of November 29, and Law 26/2006, of July 17, on Insurance and Reinsurance Intermediation.
3. The provisions of Section 6 of Chapter II of Title III shall apply to insurance entities.
4. When the client acts within the scope of their professional or business activity, the parties may agree that the provisions of this Order do not apply in whole or in part, with the exception of what is established in Chapter II of Title III.
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Article 3. Commissions.

1. The commissions received for services provided by credit institutions shall be those freely fixed between said institutions and clients.
   Commissions may only be received or expenses passed on for services requested in firm or expressly accepted by a client, and always provided they respond to services effectively rendered or expenses incurred.
2. Credit institutions shall make available to clients, duly updated, the commissions usually received for the services they provide most frequently, as well as the expenses passed on in said services, all in a unified format, according to the specific terms determined by the Bank of Spain.
   This information shall include, in all cases, in a simple manner that facilitates comparison between entities, the concepts that generate commission, the periodicity with which they are applied, and the amount thereof disaggregated by the period in which they are applied.
   This information shall be available in all commercial establishments of credit institutions, on their electronic pages, and on the electronic page of the Bank of Spain, and shall be available to clients, at any time and free of charge.
3. Immediately before a banking service is to be provided to a client through a distance communication medium or an automated teller machine or a similar device, it must be indicated, by a clear, perfectly perceptible, and free message, the commission applicable for any concept and the expenses to be passed on. Once this information is provided, the client shall be offered, also free of charge, the possibility to withdraw from the requested operation.
   When the banking service is to be provided through an automated teller machine or a similar device and the issuer of the payment medium is different from the holder thereof, the information provided in the previous paragraph may be replaced by the maximum value of the commission and other additional expenses to which the requested operation may be subject. In this case, it must be informed that the amount finally charged may be lower, depending, if applicable, on the conditions stipulated in the contract concluded between the client and the issuer of the payment medium.
4. In banking services provided through a distance communication medium or an automated teller machine or a similar device, a telephone number for incidents shall appear in a visible place, to which one may turn in case problems arise in the provision of services.
   Article 4. Interest rates.
5. The interest rates applicable to banking services, in operations of both deposits and credit or loans, shall be those freely fixed between the credit institutions providing them and clients, regardless of the modality and term of the operation.
6. Credit institutions shall make available to clients, duly updated, the interest rates usually applied to the services they provide most frequently, in a unified format, according to the specific terms determined by the Bank of Spain.
   This information shall include, in all cases, in a simple manner that facilitates comparison between entities, the Annual Percentage Rate of Charge (APRC) or another equivalent expression of the operation. For these purposes, the Annual Percentage Rate of Charge shall be understood as that which equates at any date the present value of the effective amounts received and delivered throughout the operation, for all concepts, including the remaining balance at its end, with the exceptions and indications determined by the Bank of Spain, without prejudice to what is provided in Article 31 and the annexes of this Order. The formula used to obtain the aforementioned information shall be made explicit, either directly or by reference to the Official State Gazette in which the regulation containing it was published. This unified information shall be available in all commercial establishments of credit institutions, on their electronic pages, and on the electronic page of the Bank of Spain, and shall be available to clients at any time and free of charge.
7. Institutions that allow implicit overdrafts in deposit accounts or implicit excesses in credit accounts shall publish, in the form and with the indications established by the Bank of Spain, the commissions, interest rates, or surcharges applicable to these cases. These rates shall be mandatory for all operations of that nature that did not have other lower rates fixed contractually. In particular, institutions shall separately state the rates applicable to implicit overdrafts referred to in Article 20 of Law 16/2011, of June 24, on consumer credit contracts.
   Article 5. Advertising.
   All advertising of credit institutions referring to banking services shall be clear, objective, and not misleading, in accordance with what is provided in Order EHA/1718/2010, of June 11, on the regulation and control of advertising of banking services and products, and in Circular 6/2010, of September 28, of the Bank of Spain, to credit institutions and payment entities, on advertising of banking services and products.
   Article 6. Pre-contractual information
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