The XI. Civil Senate of the Federal Court of Justice has ruled that a pre-formulated provision concerning a “loan fee” amounting to 2 percent of the loan sum in building savings contracts between consumers and businesses is invalid.
Facts of the case:
Of the three originally scheduled proceedings concerning the admissibility of loan fees in building savings contracts, after the withdrawal of two appeals, case XI ZR 552/15 still remained to be decided. In this matter, a consumer protection association, registered as a qualified entity pursuant to § 4 UKlaG (Act on Injunctions), is suing. It is filing an action for injunctive relief under § 1 UKlaG against a clause contained in the General Terms and Conditions for Building Savings Contracts (ABB) of the defendant building society, according to which, upon commencement of the disbursement of the building savings loan, a “loan fee” amounting to 2 percent of the building savings loan becomes due and is added to the building savings loan (§ 10 ABB).
The plaintiff asserts that the contested clause violates Section 307 of the German Civil Code and seeks an injunction against the defendant to cease its use in dealings with consumers.
Procedural History:
The action was dismissed in both lower instances. The plaintiff's appeal on points of law, admitted by the Higher Regional Court, was successful.
Decision of the Federal Court of Justice:
The “loan fee” constitutes an ancillary price agreement subject to judicial review of clauses. The clause is to be understood such that the fee does not price a specific contractual consideration. Rather, the fee serves to compensate for administrative expenses incurred by the defendant in connection with building society loans.
Thus, the clause deviates from fundamental principles of statutory regulation. Firstly, this fee constitutes a charge that, contrary to the statutory model for loan agreements which provides for term-dependent interest under Section 488 (1) sentence 2 of the German Civil Code, is not structured as term-dependent. This model is, contrary to the opinion of the Higher Regional Court, also applicable to building society loan agreements. Secondly, according to the established case law of the Federal Court of Justice, remuneration clauses in General Terms and Conditions are incompatible with fundamental principles of the legal system when expenses for activities are passed on to the customer, for which the user is legally or contractually obliged, or which it performs predominantly in its own interest. This is precisely what the contested clause stipulates.
These deviations of the clause from fundamental principles of statutory regulation unreasonably disadvantage the contractual partners of the building society. In particular, the fee is not levied in the collective overall interest of the building society community, as it does not contribute to ensuring the functionality of the building society system. The loan fee is also not offset by individual advantages for building society customers, such as favorable loan interest rates, as these are already counterbalanced by not insignificant disadvantages, such as an origination fee.
Judgment of the Federal Court of Justice of november 8, 2016 – XI ZR 552/15
Source: Press Release of the Federal Court of Justice
Goldberg Attorneys at Law 2016
Attorney Michael Ullrich, LL.M. (Information Law)
Specialist Attorney for Information Technology Law
Email: info@goldberg.de
