The new type of home credit

I understand and accept that banks charge commissions, however, this does not prevent me from considering some of those commissions immoral and perhaps even illegal.

As a preamble, I begin by saying that, generally speaking, I understand and accept the practice of banks charging commissions. I understand that banks have every legitimacy to charge a price for the services they provide and also that this component of the banking product must assume an ever greater preponderance due to the drastic reduction in the “financial margin” component.

The conjuncture in which they operate - with interest rates at historic lows (with negative Euribors and the DP remuneration rate with the Central Bank) and the high risk in the economy - makes it inevitable that banking activity will be increasingly supported by the provision services and less in their traditional commercial activity.

This awareness of mine (I would also say the sensitivity of those who worked for almost 20 years in the financial system), however, does not prevent me from considering some of these commissions immoral and, perhaps even illegal. The immense need for these receipts and the eagerness to obtain them leads banks not to look at means and, consequently, to go beyond all limits of reasonability and, as I say, even of legitimacy.

I am going to refer specifically to the “management” commissions that banks charge for home loans and, in particular, older loans. I have in front of me one of these credits contracted at CGD. With a TAN of 0,127%, this credit today has a TAE (the true cost to the customer) of 4%, that is, about 387% higher! As is evident, the successive increases in the “management” fees are, to a large extent, responsible for that brutal difference. In this specific case, in each monthly installment, the commission amount is higher than the interest amount!

In this case, as in many others, the contracts were entered into, at the strategic option of the clients, providing for a variable interest rate and indexed to a Euribor rate. It so happens that, with the evolution of this index that is very unfavorable to banks, they understood it legitimate to compensate for this evolution with the increase of the so-called “management” commission even though the cost of credit management is strictly the same (not to say less).

With this index hitting the bottom and practically invariable, banks thus achieve this extraordinary thing which is, unilaterally, to make these contracts indexed to the “commission that the banks arbitrarily want to charge”.

This situation, in my view, is legally unacceptable because it results in an essential and unilateral amendment to the contract, and should also be unacceptable by the supervisory authority.

Exacerbating this situation is the fact that the banking market is very uncompetitive, an oligopoly with five banks holding more than 90% of the market and with well cartelized actions - as it has already detected and punished the AC, exactly regarding the fees charged - which gives them even more market power and, consequently, removes any defense to customers for lack of alternative.


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