On 05.11.2008, the Federal Cabinet adopted the draft law on the implementation of the Consumer Credit Directive, the civil law part of the Payment Services Directive as well as on the reorganisation of the regulations on the right of withdrawal and the right of return. This law transposes the aforementioned directives into national law.
On the regulations in detail:
- 1. Consumer loan
- Information and contract explanation: In the future, a consumer is to be informed about the essential components of the loan already before concluding a loan contract in the so-called contract initiation phase. This will enable the consumer to compare different offers and make an informed decision for or against a contract offer. This reinforces the model of a responsible and independent consumer. As soon as the choice for a certain credit becomes apparent, the lender must additionally explain the main features of the contract to the consumer.
- Advertising: Advertising for loan contracts will be more strictly regulated. Those who advertise the conclusion of loan contracts are not only allowed to highlight a single figure (such as a particularly low interest rate), but they must also indicate the other costs of the contract. This will prevent bait-and-switch offers and enable consumers to weigh up the pros and cons for themselves on the basis of meaningful information.
- Model for consumer loans: In the future, uniform models for informing consumers will apply to different credit agreements. All costs of the credit agreement will be recognisable on the basis of these models. Different offers can be compared better than before. The models apply throughout Europe, so that customers can also obtain and compare offers from lenders in other European countries.
- Termination: The termination options for loan agreements are newly regulated. In the case of open-ended contracts, termination by the lender is now only permissible if a notice period of at least two months has been agreed. Consumers, on the other hand, can terminate an open-ended contract at any time. In this case, the contractually agreed notice period for the consumer may not exceed one month. In the case of fixed-term contracts, consumers may repay the loan in full or in part at any time in the future. If the lender demands an early repayment fee in such a case, this is limited to a maximum of one percent of the amount repaid early.
Not only pure loan agreements, but also other financing transactions, such as instalment contracts and leasing agreements, are covered by the new regulations.
Existing exemption regulations are largely abolished. As a result, consumers will be protected in the same way in instalment and finance leasing contracts as in consumer loan contracts.
2. payment services
In the area of cashless payment transactions, providers and users of payment services will in future have largely uniform rights and obligations throughout Europe. For the first time, there are uniform rules for both purely domestic and cross-border payment procedures (e.g. credit transfer, payment card, direct debit). This facilitates cashless payments and increases legal certainty for all parties involved. A single euro payments area (SEPA) will also allow payment service providers to develop new procedures for payments in euros that function throughout Europe (so-called SEPA products).
Examples: A European direct debit system will make it possible for electricity and telephone costs for a holiday flat on Tenerife or the rent for the room in the student dormitory during a stay abroad to be conveniently debited monthly from a German account. Even for orders from other European countries, payment no longer necessarily has to be made by credit card, but can be made by direct debit or bank transfer.
Therefore - as far as the question of payment is concerned - the location of a provider will no longer be an obstacle for a customer to choose the most favourable offer. At the same time, a level playing field also promotes cross-border competition among payment service providers. Uniform requirements on information for customers will make it easier to evaluate the offers of foreign payment service providers.
Finally, the new regulations lead to a standardisation and shortening of the execution and value dates: In future, no distinction will be made between national and cross-border payments within the EU. Up to now, cross-border transfers within the EU have to be made within five working days. As of 1 January 2012, all payment orders in euro must be executed within one business day. Until then, a 3-day execution period can be agreed. This will allow payment service users to fulfil their payment obligations to their creditors more accurately and to work with their money for as long as possible.
3. right of revocation and return
The already existing regulations on the right of withdrawal and return are reorganised. This leads to more legal certainty, not only for consumer contracts, but also - through an amendment to the Insurance Contract Act - for insurance contracts. Entrepreneurs who use the new models as a template for their instructions on the right of withdrawal and return will no longer have to fear warnings under competition law or unlimited rights of withdrawal or return. In addition, largely the same cancellation periods and cancellation consequences apply to distance selling transactions via an internet auction platform and those in a conventional internet shop.
The law passed by the Federal Cabinet on 5 November 2008 still has to be discussed and passed by the German Bundestag. It is to enter into force on 31 October 2009. It does not require the approval of the Bundesrat.
Source: Press release of the Federal Ministry of Justice of 05.11.2008, Published by the Press and Public Relations Department 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
