VfGH: Interest-free Debt Moratorium Is Constitutional

Feb 17, 2023 Benn-Ibler Rechtsanwälte

The Austrian Constitutional Court (Verfassungsgerichtshof, hereinafter VfGH) has rejected the request by 403 banks to review the law on the interest-free debt moratorium during the pandemic.

Section 2 of Austrian Zweites COVID-19-Justiz-Begleitgesetz provided that for consumer loans concluded before 15 March 2020, interest or redemption payments due between 1 April 2020 and 31 January 2021 would be deferred for ten months if the consumer suffered a loss of income as a result of the pandemic. If no amicable agreement was to be reached between a bank and the consumer for the period after 31 January 2021, the due date of the contractual payments was to be postponed by this period. The Austrian Supreme Court ruled in December 2021 that no interest was allowed to be charged in the case of a moratorium (3Ob189/21x).

The banks objected (only) to the fact that they were required to bear the costs of this moratorium in the absence of any other agreement with customers. They complained of an encroachment on private autonomy and the inviolability of property.

The VfGH considered the bearing of costs by the banks to be in conformity with the constitution:

The contested provision, as interpreted by the Austrian Supreme Court (Oberster Gerichtshof) does not constitute a disproportionate encroachment on the right to inviolability of property. Indeed, the provision served the public interest of protecting consumers and micro-entrepreneurs affected by the pandemic. They were to be given time to provide the capital required for repayment.

In addition, there are a several points qualifying the materiality of property encroachment:

The debt moratorium only came into effect in those cases where consumers had a loss of income due to the pandemic that made loan repayment unreasonable. In the oral hearings it also was revealed that most of the banks did not even check these preconditions. If they had done so, there might have been fewer interest-free loan moratoria. And even without the moratorium, it would have been questionable whether the borrowers covered would have been able to meet their obligations at all.

In addition, the European Central Bank took numerous monetary policy and banking supervisory measures to cushion the impact of the pandemic on credit institutions.

VfGH G 174/2020 (13.12.2022)