DE: Consumer's debt assumption for an overdraft loan - Can he withdraw?

Jan 21, 2022 Benn-Ibler Rechtsanwälte

The German Federal Supreme Court (Bundesgerichtshof, BGH) ruled on the question of the extent to which a consumer has a right of withdrawal when joining a debt assignment and assumption agreement to secure an overdraft.

Small businesses often refinance their short-term financing needs with overdraft loans from their bank. In this case, the borrowers are not consumers but entrepreneurs. It is therefore not possible for the entrepreneur to withdraw such loans under the regulations on the withdrawal of consumer loan agreements. However, even if the borrower had been a consumer, the right of withdrawal would have been excluded anyway for the relevant overdraft loan under Section 504 para 2 sentence 1 of the German Civil Code (Bürgerliches Gesetzbuch, BGB).

Now the question arises to what extent the right of withdrawal of joining third party, i.e. the consumer, is also invalid. Can the third party declare withdrawal to the bank even though the entrepreneur as borrower is not entitled to do so?

In the case at hand, the wife of the defendant ran a laundry business as a sole entrepreneur. Her husband was a silent partner with a contribution of EUR 400,000. In 2021, the wife took out a bank overdraft with the plaintiff bank. Her husband assumed joint and several liability. When bankruptcy proceedings were opened against the wife's assets in October 2015, the plaintiff bank demanded repayment of the outstanding balance. In doing so, it also claimed against the husband as a co-debtor (co-obligor). In the bank's claim for payment, he then declared the withdrawal of his co-obligation.

In this regard, the Senate determined that the protection of the co-obligor must not take a back seat to that of the borrower, but at the same time cannot go beyond it either. As already mentioned, the entrepreneur as borrower does not have a right of withdrawal here and consequently also not the co-obligated third party, even if he is a consumer. It would also be inconsistent to grant a right of withdrawal to the consumer assuming joint liability if even the borrower, even if he were a consumer, is not entitled to a right of withdrawal.

BGH XI ZR 650/20 (21.09.2021)