GER: Bank Fees for Early Repayment Calculations Are Illegal

Jan 27, 2023 Benn-Ibler Rechtsanwälte

Banks are not allowed to charge a separate fee for calculating early repayment penalties. This was the decision of the Higher Regional Court of Frankfurt am Main (OLG). Such calculations are part of a bank's secondary contractual obligations towards their customers.

The defendant bank offers, among other things, consumer loans. According to the bank’s schedule of prices, personal loan customers are charged a lump sum of EUR 100 if they want the bank to calculate its fee for early repayment of the loan. The plaintiff considered this clause invalid. The lower court did not grant application for injunctive relief. The appeal before the OLG, however, has now been successful.

According to the court, such clauses are invalid. They are incompatible with fundamental tenets of the German legal system, and they put customers at an unreasonable disadvantage. A bank’s ancillary contractual duty to inform borrowers about the fee in case of early loan repayment applies independently of banks’ legally standardised duty to provide information pursuant to Section 493 (5) of the German Civil Code in implementation of the EU’s Consumer Credit Directive (Directive 2014/17/EU). However, this legal requirement only applies to real estate loans.

The court stressed that calculations for early repayment fees are very complex and involve calculations that are difficult for the average consumer to grasp. In contrast, banks can easily calculate such fees with the help of computer programmes. Therefore, this calculation does not constitute an extra service that would be subject to a separate fee. This applies irrespective of whether or not early repayment is actually made.

The clause objected to by the plaintiff thus deviates from the basic principle that banks must fulfil their contractual obligation to inform borrowers at no extra charge. Any deviation from this constitutes an unreasonable disadvantage to borrowers. The bank must therefore accept the fact that such calculations cause them administrative expenses.

Press Release, OLG Frankfurt am Main, 17 U 132/21 (14.12.2022)