Business Law

The BGH on bank loan T&Cs and administration fees

Germany’s Federal Court of Justice recently ruled that banks are not permitted to charge administration fees when granting consumer loans, meaning that many bank customers can now bring claims for the reimbursement of administration fees they have paid. But when will the time limit expire.

The BGH on bank loan T&Cs and administration fees ©-ferkelraggae-Fotolia-Fotolia_31081868_XS

The BGH on bank loan T&Cs and administration fees ©-ferkelraggae-Fotolia-Fotolia_31081868_XS

Bank loan administration fees

In a recent leading judgment, Germany’s Federal Court of Justice (Bundesgerichtshof, BGH) held that banks are not permitted to charge administration fees for granting bank loans to consumers (judgment from 15.03.2014, case ref. XI ZR 405/12 and XI ZR 170/13). Such clauses had been found in many banks’ standard terms and conditions.

This led many bank customers to claim for the reimbursement of administration fees. Now, many people are curious about when the time limit for bring reimbursement claims expires.

Applicable loan contracts

The banks take a different view to the BGH. They argue that the BGH’s judgment is not applicable to every type of loan contract. In cases where the judgment is not applicable, a refund of the administration fee is not possible, they claim.

Here at WILDE BEUGER SOLMECKE, we disagree with the banks’ view. Instead, it is correct to note that the full text of the judgment has not yet been published. Nevertheless, it is clear from the press release that banks are not permitted to charge extra administration fees for granting a consumer loan. This statement leaves little room for favourable interpretations.

Time limit expiry

In relation to loan contracts concluded before 2011, the banks further assert that because the administration fee was paid together with the first loan repayment the time limit for bringing claims for reimbursement has expired.

We believe that this argument is also false. In order for such circumstances to apply, explicit clauses concerning the repayment of the principal amount and the administration fee must be contained in the loan contract. Many loan contracts, however, lack such a provision.

Time limit to bring claims

The BGH is due to make a decision in November 2014 on the time limit for bringing claims for the reimbursement of bank loan administration fees.

In a relevant judgment, the Regional Court Stuttgart ruled that the time limit will begin to run once the legal position has been decisively clarified (judgment from 18.12.2013, case ref. 13 S 127/13).

Questions about the legal position first started being answered in 2011, as it was during this year in which many regional appeal courts declared the administration fee clauses to be ineffective.  In view of the unclear legal position, it would have been unreasonable to expect lay people to bring cases before this point.

According to this proper interpretation, the time limit for bringing claims relating to loan contracts from 2011 will be the end of 2014 at the earliest.

Partial expiry

Even if it could be argued that the time limit has already expired, this only applies to claims or payments made in 2011.

However, where loan contracts do not contain a clause on the repayment of the administration fee, a fraction of the fee is repaid with each loan instalment repayment. This means that claims to the reimbursement of the fractions of the administration fee repaid after 2011 have not yet expired.

Reimbursement

Customers who think they have a right to the reimbursement of a falsely paid administration fee may contact their bank using our specimen form (available here) to request a refund. Should the bank fail to reply to the request, we would advise to seek legal assistance. Our expert team of German lawyers is available to help you.

Christian Solmecke is a partner at the law firm WILDE BEUGER SOLMECKE. He is the author of numerous legal publications in the area of internet and IT law. He is also an associate lecturer for social media law at the Cologne University of Applied Sciences.

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