On november 5, 2008, the Federal Cabinet adopted the draft of a law for the implementation of the Consumer Credit Directive, the civil law part of the Payment Services Directive, and for the reorganization of provisions concerning the right of withdrawal and return. This law transposes the aforementioned directives into national law.
Details of the regulations:
- 1. Consumer Loans
- Information and Contract Explanation: In the future, consumers are to be informed about the essential components of a credit agreement during the so-called pre-contractual phase, even before concluding a loan agreement. This enables consumers to compare various offers and make an informed decision for or against a contract offer. This reinforces the ideal of a responsible and independently acting consumer. As soon as a choice for a specific credit becomes apparent, the lender must additionally explain the main features of the contract to the consumer.
- Advertising: Advertising for loan agreements will be more strictly regulated. Those who advertise for the conclusion of loan agreements may not only highlight a single figure (e.g., a particularly low interest rate) but must also state the other costs of the contract. This prevents misleading offers and enables consumers to weigh the pros and cons themselves based on meaningful information.
- Templates for Consumer Loans: In the future, uniform templates will apply to different credit agreements for informing consumers. These templates will make all costs of the credit agreement transparent. Different offers can be compared more effectively than before. The templates are valid throughout Europe, allowing customers to obtain and compare offers from lenders in other European countries.
- Termination: The termination options for loan agreements are being re-regulated. Terminations by the lender for open-ended contracts are only permissible if a notice period of at least two months has been agreed upon. Consumers, on the other hand, can terminate an open-ended contract at any time. In such cases, the contractually agreed notice period for the consumer may not exceed one month. For fixed-term contracts, consumers will in the future be able to repay the loan in full or in part at any time. If the lender demands an early repayment penalty in such a case, it is limited to a maximum of one percent of the amount repaid early.
The new regulations cover not only pure loan agreements but also other financing transactions, such as installment payment agreements and leasing contracts.
Existing exemption clauses are largely repealed. This means that consumers in installment payment transactions and financial leasing contracts will generally be protected to the same extent as in consumer loan agreements.
2. Payment Services
In the area of cashless payment transactions, largely uniform rights and obligations will apply to providers and users of payment services throughout Europe in the future. For the first time, there are uniform regulations for both purely domestic and cross-border payment procedures (e.g., bank transfer, payment card, direct debit). This facilitates cashless payments and increases legal certainty for all parties involved. Furthermore, a Single Euro Payments Area (SEPA) will enable payment service providers to develop new, Europe-wide functioning procedures for payments in euros (so-called SEPA products).
Examples: A European direct debit system will make it possible for electricity and telephone costs for a holiday apartment in Tenerife or rent for a student dormitory room during a stay abroad to be conveniently debited monthly from a German account. Furthermore, for orders from other European countries, payment no longer necessarily has to be made by credit card but can be carried out by direct debit or bank transfer.
Therefore, regarding payment, a provider's location will no longer be an obstacle for customers to choose the most favorable offer. At the same time, uniform framework conditions also promote cross-border competition among payment service providers. Standardized requirements for customer information will make it easier to evaluate offers from foreign payment service providers as well.
Finally, the new regulations lead to a standardization and shortening of execution and value dating periods: In the future, there will no longer be a distinction between national and cross-border payments within the EU. Previously, cross-border transfers within the EU had to be executed within five working days. As of January 1, 2012, all payment orders in euros must be executed within one business day. Until then, a 3-day execution period can be agreed upon. This allows payment service users to fulfill their payment obligations to their creditors more precisely and to work with their money for as long as possible.
3. Right of Withdrawal and Return
The existing provisions regarding the right of withdrawal and return are being reorganized. This leads to greater legal certainty, not only for consumer contracts but also – through an amendment to the Insurance Contract Act – for insurance contracts. Businesses that use the new templates for their instructions on the right of withdrawal and return will no longer have to fear competition law warnings or indefinite rights of withdrawal or return. Furthermore, largely identical withdrawal periods and consequences of withdrawal apply to distance selling transactions via an internet auction platform and those in a conventional online shop.
The law adopted by the Federal Cabinet on november 5, 2008, still needs to be debated and passed by the German Bundestag. It is scheduled to come into force on October 31, 2009. The consent of the Bundesrat is not required.
Source: Press release from the Federal Ministry of Justice of november 5, 2008, Issued by the Press and Public Relations Division of the Federal Ministry of Justice
Goldberg Attorneys at Law, Wuppertal-Solingen 2008
Attorney at Law Michael Ullrich, LL.M.(Information Law)
m.ullrich@goldberg.de
