Regulatory regime applicable to consumer loans in Spain

Pursuant to Spanish law there are two types of institutions which can be active in granting credits in general (and Consumer Loans in particular): credit institutions and financial credit establishments.

Credit institutions in Spain

A credit institution (formed as a company) is defined under Spanish law as a company engaging in any activity consisting of the solicitation of repayable funds from the public in the form of deposits or other borrowings, and the application of such funds to grant credits or carrying out similar transactions for its own account. Spanish credit institutions may therefore engage in a number of retail banking services, but may also offer securities and financial advisory services.

Credit institutions must be recorded in a register maintained by the Bank of Spain before they commence banking activities. The following entities are considered as credit institutions: Banks (public limited-liability companies); Savings banks; and, Credit cooperatives (which also are regulated by the Autonomous Communities).

The Spanish regulatory regime for credit institutions is set out in a number of laws and regulations establishing the rules aimed at providing supervisory authorities with full information on the state of Spanish financial institutions, as well as rules to restrict or prohibit practices or operations that increase the risk of insolvency or lack of liquidity, and to strengthen the capital requirements with which the institutions can manage those risks without causing harm to depositors and the wider Spanish economy.

The Bank of Spain (together with the Spanish National Securities Exchange Commission) is the government body that exercises general supervisory powers over domestic credit institutions. Those powers cover a broad range of banking concerns, including professional conduct and practices and solvency, among many others[1].

Financial credit establishments

Financial credit establishments are those companies which are not in the strictest sense credit entities and typically perform one or more of the following activities: a granting of loans, credits and facilities, including consumer credit, mortgages and commercial transaction financing; factoring; leasing; issuing and managing credit cards; and, (v) granting bonds and sureties.

Financial credit establishments need to obtain prior to exercising their activities the relevant financial credit establishment license.

Regarding the differences between financial credit establishments and credit institutions (mainly in relation to their financing structure) the requirements placed on the financial credit establishments for pursuing their activities are more flexible in comparison with those demanded of credit institution.

Financial and banking activities: regulated activity

All the activities carried out by credit institutions as well as by financial credit establishments are activities subject to the Bank of Spain’s supervision, and, hence, the performance thereof on a regular or professional basis requires the appropriate license.

There is no other activity that qualifies as a ‘financial or banking activity’ that would fall outside the scope of the regulated activities, with the possible exception of the so-called ‘operative leasing’ or ‘renting activities([2]).

Consumer Loan activity: non-regulated activity

Notwithstanding the above, in case a non-credit institution (i.e., neither a credit institution nor a financial credit establishment according to their definition indicated above) is solely to undertake the activity of granting Consumer Loans, such non-credit institution (formed as a company) may carry out such activity without a license.

Hence, such non-credit institution (formed as a company) will solely have to be registered within the relevant Commercial Registry, falling outside the Bank of Spain’s supervision and will be subject to consumer Spanish authorities and, in particular, to the following legislation:

  • General regime: Law 1/2007, of 16 November, on Consumers and Users Protection (the ‘Consumer Protection Law‘);
  • Special regime: Law 16/2011 of 24 June on Credit Consumer Agreements (‘Consumer Loan Agreement Law‘ or ‘CLA Law‘); and,
  • Supplementary regime: among others, (a) Law 34/2002 of July, on Information Society Services and Electronic Commerce (‘E-Commerce Law‘); (b) Law 34/1988 of 11 November, on General Advertising (‘General Advertising Law‘); (c) Law 22/2007 of 11 July on Distance Marketing for Financial Services (‘Distance Marketing of Financial Services‘); and, (d) Law 7/1998, of 13 April on Standard Terms (‘Standard Terms Law‘).

This article is not considered as legal advice


[1] Inspections and detailed reporting requirements allow the Bank of Spain to ensure compliance with regulations. These measures also enable the Bank of Spain to issue warnings or take any other disciplinary measures that are appropriate under the circumstances, which may range from the appointment of a special supervisory body to control the management of a given credit institution to the revocation of the license of the relevant credit institution.

[2] This is, a short-term or medium-term leasehold, where the leasing period is shorter than the life cycle of the leased asset and the purchase of the leased asset is not agreed in the contract in advance but rather the lessee is obliged to return the leased asset upon the termination of the contract.

Alberto Álvarez

Having graduated in International Business Law from the Universidad San Pablo CEU, Alberto Alvaréz specialises in tax law, insolvencies and restructuring. Working languages: English, German, and Spanish. For any further enquiries please Contact us