Negative interest ILLEGAL: Courts stand behind consumers

Dec 15, 2021 Benn-Ibler Rechtsanwälte

The next blow for German banks - after the illegal fee increase, negative interest rates must now be paid back to individual customers.

The Berlin Regional Court ruled for the first time that negative interest charged on checking (giro) and savings accounts is illegal. The Sparda-Bank has to pay back the negative interest to the affected consumers. The judgement is not yet legally binding.

In the case at hand, Sparda-Bank had been charging 0.5 per cent per year, a so-called administrative fee, on the credit balances of checking and savings accounts for about a year, when these exceeded a certain amount. The allowance amount for savings accounts was EUR 50,000, the allowance amount for checking accounts EUR 25,000. The custodian fee charged corresponds exactly to the interest rate that banks have to pay for deposits at the European Central Bank (ECB). The Federation of German Consumer Organisations (Verbraucherzentrale Bundesverband) filed a complaint against this procedure before the Berlin Regional Court.

According to the Berlin Regional Court, such a custodian fee is "incompatible with the fundamental ideas of the legal regulation", Section 307 para. 2 no. 1 of the German Civil Code (Bürgerliches Gesetzbuch, BGB). The clause unreasonably disadvantaged the consumer. A checking account contract constitutes a framework contract for payment services to which both the regulations on custodial agreements and the law on loans apply.

The bank argued that they consider the safekeeping of money as an independent special service and that negative interest in the form of a corresponding so-called safekeeping fee constitutes the compensation for such safekeeping. Since the custodian fee is a main service obligation of a separate custodial relationship, it is also exempt from being monitored.

However, the court is of the opinion that the custodial function was inherent in a framework contract for payment services and not a special service that could be accepted or rejected in addition. Depositing money into one's own checking account could constitute a kind of loan to the bank, whereby the bank is the borrower and actually has an interest payment obligation to the bank customer. The interest charge is thus one of the bank's main service obligations and not those of the bank client. With a corresponding custodian fee, a bank would consequently pass on its own operating costs and the expense of fulfilling its own obligation to its customers. The clause thus runs counter to the legal model.

LG Berlin, 16 O 43/21 (02.09.2021)