Credit Institution General Terms & Conditions (Part 1)

Apr 2, 2026 Benn-Ibler Rechtsanwälte

The Austrian Chamber of Labour filed a challenge against a credit institution concerning eight clauses contained within its General Terms and Conditions. USANCEN will evaluate these clauses clauses, beginning with the following two:

Clause 1: “Interest on arrears: 6.125% p.a.”

Clause 5: “Default interest on consumer loans shall be the agreed interest rate plus 5.000% per annum.”

The court of first instance determined that these clauses were excessively unfavorable as they deviated from established contract law without objective justification. The court of appeal affirmed this judgment.

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) made these key points:

According to the law of damages, default damages are defined as a minimum lump sum that the injured party is entitled to claim, irrespective of evidence regarding actual losses in that amount. In contrast to contractual penalties, which necessitate culpable non-performance, default interest does not require proof of fault.

Case law indicates that, under specific conditions, deviation from established legal standards may result in significant detriment to the contracting party when such deviation lacks objective justification.

According to Section 6(1)(13) of the Austrian Consumer Protection Act (Konsumentenschutzgesetz, hereinafter KSchG), any contract term that sets default interest more than five percentage points higher than the agreed payment interest rate is considered unlawful. No objective justification can make such a clause acceptable. However, this does not automatically mean that every clause covered by Section 6(1)(13) of the KSchG is valid.

The OGH determined that there was no valid reason to depart from contract law. Clauses 1 and 5 place parties at a significant disadvantage.

OGH, 7 Ob 111/25m, 25 February 2026