Consumers can now also use the so-called revocation wildcard for many contracts dating back almost a decade. You can get out of the contract and save thousands of euros. A real wave of revocations could come to banks.
A customer concluded a loan contract for EUR 100,000 with the Kreissparkasse Saarlouis in 2012. In 2016 he revoked it and argued that he had not been correctly informed about his right of withdrawal.
The Sparkasse refused to withdraw, the customer went to court. The Saarbrücken district court finally stayed the proceedings (file number 1 O 164/18) and asked the CJEU whether the customer could see when the withdrawal period for the loan started and when it ended.
The CJEU (file number C-66/19) agreed with the customer that the cancellation policy was not understandable and stated: “Consumer credit agreements must state the modalities for calculating the cancellation period in a clear and concise form.” About the specific one The Saarbrücken district court must now decide the case.
The Luxembourg judges criticized above all that the customer had to deal with many provisions in various legal systems in order to understand the scope of his contractual obligations. All the more he could not decide whether the withdrawal period had started for him.
Specifically, the revocation instruction was about the passage: “The period (for the revocation of the real estate loan) begins after the conclusion of the contract, but only after the borrower has received all the mandatory information pursuant to Section 492 (2) BGB (…).”
The practical consequence of the nested construction, which experts refer to as a cascade reference: The customer first has to find out which mandatory information is involved. Only three of these are mentioned as examples in numerous revocation instructions: for example, information on the type of loan, information on the net loan amount and information on the contract term.
Which loan contracts are affected?
The ruling affects millions of contracts. It is particularly relevant for two types of loans: real estate and construction finance as well as car loan or leasing contracts.
The dimensions are enormous: The Luxembourg judge’s decision is likely to extend to loans with a volume of up to 1.5 trillion euros – construction loans in the amount of 1.2 trillion euros and car finance with a value of 340 million euros.
Experts estimate that this affects almost all 20 million car loans that were agreed between June 14, 2010 and today. The contested cascade reference can therefore also be found in the majority of current contracts.
It is a bit more complicated with real estate financing. Essentially, only contracts that were concluded between June 11, 2010 and March 20, 2016 are affected there. “After that, a different wording was used in the loan agreements,” says Thomas Röske, the lawyer from the Berlin law firm Gansel, who won the ECJ judgment for the client of the Kreissparkasse Saarlouis.
In the case of contracts that were concluded from March 21, 2016, the right of withdrawal is also limited to a maximum of one year and 14 days – even in the event of incorrect instructions or if instructions are not given at all. The ruling therefore also extends to real estate financing that was agreed from the end of March 2019 and that contains the clause contested by the CJEU.
What are the consequences of the ruling for consumers?
Consumers whose contracts are affected can draw the so-called cancellation joker and can still declare the cancellation of their loans today. Because the deadline for this has not yet started.
Withdrawal offers customers the opportunity to withdraw early from the loan agreement on advantageous terms. The savings can be enormous, depending on the loan amount, several thousand euros are realistic, especially in many cases of real estate financing. The customer of the Kreissparkasse Saarlouis, for example, concluded his real estate loan agreement at a loan interest rate of 3.6 percent. Today, such ten-year construction loans cost on average less than 0.8 percent.
The Hamburg consumer advice center provides a concrete example: with a loan interest rate of 1.5 instead of 4.5 percent, a residual debt of 180,000 euros and a remaining term of around four and a half years can save around 24,000 euros.
What are the chances for customers?
According to most consumer lawyers, the situation is clear in the case of the car loan and leasing contracts affected since 2010: customers should therefore be successful with their revocation.
With regard to real estate financing, the current judgment of the CJEU has “a horse’s foot” as described above, says Alexander Krolzik, an expert in construction finance at the Hamburg consumer advice center. “The Federal Court of Justice (BGH) had already declared the cascade reference in revocation instructions to be legal in 2016.
It may therefore be that banks and savings banks continue to rely on the decision of the top judges in Germany, says Krolzik. So far, the Federal Court of Justice has held the view that EU law is not applicable to revocation questions for real estate financing.
At this point, Thomas Röske is also confident for customers: “According to the will of the German legislator, the requirements of EU law also apply expressly to real estate financing.”
The Community of Interest (IG) revocation, which supports customers in disputes with banks, also gives consumers hope for a ultimately successful revocation: “Many large real estate financiers could give up their blockade and make compromise offers,” it says here.
Alexander Krolzik assesses the situation in a similar way. The consumer advice center thinks it is quite possible that “The ECJ ruling means that credit institutions are more likely to engage in negotiations and at least negotiate with their customers about the redemption or rescheduling of a loan for the future.
What does a cancellation mean?
A revocation cannot be undone. As a result of a cancellation, the entire loan is reversed.
Specifically, this means that car loan borrowers are reimbursed for the installments and down payments they have paid. In return, they have to return the car. This prospect should be particularly attractive for customers whose vehicle is affected by the diesel scandal.
As a rule, customers have to pay a so-called usage fee for the use of the vehicles, at least for cars, the financing of which was concluded by June 12, 2014. The majority of court decisions still provide for usage compensation for contracts concluded thereafter, but the case law is no longer uniform here.
At least in the opinion of the regional courts of Berlin and Ravensburg, customers may no longer be asked to pay for the loss of value or compensation for the kilometers traveled by car from June 13, 2014. The background: that day, consumer-friendly changes to the law came into force. Thereafter, the so-called usage compensation is void if the loan contract is defective. Only the mostly low interest rates on loans would not get customers back.
In the case of real estate loans, the consumer may be able to reschedule the loan to a loan with lower interest rates or replace the contract without a prepayment penalty, despite the fact that the fixed interest rate is still pending – that is, without the penalty usually required by banks. The customer must reimburse the bank the loan amount – if it has not yet been repaid. In return, the consumer receives the installments he has paid (interest and principal). The customer gets back the overpaid interest.
Where are problems lurking?
Customers can expect that the bank will not accept the revocation and that a dispute in court will matter. Legal protection insurance only applies – if at all – as soon as the revocation has been rejected by the bank. And even then, it often does not help, at least in the case of real estate loans. Disputes arising from the financing of a new building are regularly excluded from insurance coverage, as are those relating to properties that are not used themselves but are rented out.
In some cases, it is not up to the consumer whether a legal dispute arises or not. In some cases, banks have brought an action in response to the revocation in order to have the effectiveness of the revocation judicially clarified. In view of the current ECJ ruling, this probability should have decreased significantly and the interest of the banks in an out-of-court solution should increase.
In the case of real estate loans, at least in addition to the process cost risk, there is also follow-up financing. Banks can reclaim the remaining debt within 30 days after the revocation. If the borrower cannot secure follow-up financing, there is a risk of losing the house or apartment or a foreclosure. Finding such a new loan can be difficult. Some banks refuse a new loan when they learn that the old contract has been canceled.
In the case of revoked car loans, the exact value replacement can only be determined when the car is returned. If there is a legal dispute regarding the revocation, the vehicle is usually only returned after the final judgment. Since it can take a long time until then, it remains unclear how much the customer will get back and whether the revocation and the reversal of the contract have really paid off.
How should customers proceed?
Under no circumstances should consumers declare a hasty withdrawal. On the one hand, there is usually no time pressure, because in the majority of cases – with the rather unlikely exception of affected real estate loans from 2019 – customers do not threaten to miss a deadline.
If the customer is sure that their own contract is affected by the decision of the CJEU, there are some points in the wording for revocation that need to be considered. There are various free sample letters on the Internet for declarations of revocation for loan agreements, both for real estate and for other financing such as car and leasing loans.
There are various ways to reliably clarify whether your own contract is affected. For 85 euros, for example, the Hamburg Consumer Advice Center helps consumers to assess their personal situation. Within three to four weeks, she reviews the contract and gives tips on how to proceed.
The IG revocation even advertises to check the contracts free of charge. She works with a number of consumer attorneys. If, after the initial assessment, the customer decides to hire one of these lawyers, he will transfer part of his fee to IG Wiederruf.
Especially if the bank does not agree to the revocation, a specialized lawyer is recommended to conduct the further negotiations with the credit institution or to enforce the claims in court. Here consumers should clarify the costs in advance.
In addition to asserting your own claims, it is also advisable for customers who want to withdraw their real estate loan to obtain various offers beforehand so that they can quickly repay the remaining amount of the loan to the bank or savings bank.
With car loans, the revocation is usually worthwhile for vehicles that have not yet driven many kilometers. However, if a car has already completed most of the usual total mileage, estimated at 250,000 to 300,000 euros, it is usually cheaper to keep it, depending on the age and condition of the vehicle.
More: Banks hope for political help in dispute over credit withdrawal.