OGH: Credit Brokers Must Inform

Sept 22, 2023 Benn-Ibler Rechtsanwälte

What are the consequences of a credit broker failing to provide proper information about the credit broker’s commission? This was decided by the Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH).

The claimant had arranged a loan for the defendant for financing the purchase of a property. She had not discussed the amount of her fee with the defendant in advance, nor had she informed the defendant of a percentage of her fee in this respect. The plaintiff now claimed the loan brokerage fee of EUR 5,625. The defendant argued that the plaintiff had failed to comply with duty to inform under the Austrian code of conduct for credit brokers, according to which credit brokers must inform consumers, either on paper or on another durable data medium, of the fee to be paid for services in good time before the credit brokerage activity is carried out. The court of appeal overturned the first judgment, concluding that a breach of the code of conduct for credit brokers does not automatically result in the loss of the right to a commission.

The OGH ruled on this as follows:

The Directive on residential real estate credit agreements was transposed into Austrian civil law by the Mortgage and Real Estate Credit Act (Hypothekar- und Immobilienkreditgesetz, hereinafter HIKrG). Subsections 1 to 8 of Section 8 of the HIKrG set out the lender's pre-contractual information obligations. None of these obligations to provide information has the intended consequence of rendering the credit agreement null and void. Austria has opted for a combined approach. It provides for administrative sanctions on the one hand and leaves open the possibility of civil sanctions on the other. However, the most important consequences are the law of damages and the law of errors and, in individual cases, possibly also a challenge on the grounds of fraudulent intent. The OGH has made it clear that not every legal transaction that violates the legal order in some way is immediately null and void. Rather, the legal consequence must be either expressly prescribed or required by the purpose of the prohibition.

The purpose of the provision does not require that the omission to state the fee to be paid is in itself so serious that, irrespective of all other circumstances, the agreement on the main service, i.e. the payment of the broker’s commission, ceases to apply in its entirety.

OGH 4 Ob 91/23w (31 May 2023)