Ten major banks are accused of manipulation of the corporate bond market

Deutsche Bank

The German money house is accused of years of manipulation.


(Photo: Reuters)

new York A US lawsuit accuses ten of the world’s largest banks of manipulating the corporate bond market. According to this, the money houses – including Deutsche Bank – have been asking for high prices for almost 14 years, as can be seen from court documents on Tuesday. As a result, investors were financially damaged.

The accused financial institutions include JPMorgan Chase, Bank of AmericaBarclays Citigroup, Credit SuisseDeutsche Bank Goldman Sachs, Morgan Stanley, Royal Bank of Scotland and Wells Fargo. Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and Wells Fargo declined to comment.

More: Ex-top manager of Deutsche Bank sentenced to prison.

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KfW eases conditions for quick credit

KfW

KfW quick loans have been available since Wednesday.


(Photo: dpa)

Frankfurt The conditions for obtaining the new KfW loans with full state liability have been softened again. Companies can now also receive the so-called KfW quick loan, which only made their way into the profit zone in 2019.

Originally, only companies should be able to receive money that made a profit in the sum of the years 2017 to 2019. “By applying to the house bank without further risk assessment, the aid quickly reaches the companies and thus helps to alleviate the severe effects of the corona pandemic,” said the head of the state development bank Günther Bräunig on Wednesday.

The loans are available to medium-sized companies with more than ten employees who have been active on the market since at least January 1, 2019. The federal government assumes the entire risk for loans of up to EUR 800,000.

KfW quick loans have been available since Wednesday (April 15). The first funds should flow to the companies this week. KfW has given the banks and savings banks a general commitment so that they can make an advance payment and pay the loans if the application conditions are met.

From April 22, the first funds will flow from KfW to the house banks. Then the necessary IT system should be in place. So far, this was only expected at the end of April.

Experts anticipate a high demand for the new quick loans. “We expect a large number of consulting requests and requests from our corporate customers in the coming days and weeks,” said one Commerzbank-Speaker. “We are well prepared to support our customers.”

With an interest rate of three percent, the quick loans are somewhat more expensive than the KfW aid loans launched at the end of March, in which part of the risk remains with the house banks and a credit check is carried out.

As of Tuesday evening, there were 9728 applications for these loans with a total volume of 22.9 billion euros, according to KfW. Around 90 percent of the applications were for loans under EUR 800,000. KfW will probably not be able to provide information on the demand for the new quick loans until next week.

More: The head of the supervisory board of Deutsche Börse calls for more help for start-ups.

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Goldman Sachs and Bank of America halved profits

Bank of America

Bank of America suffered a slump in profits due to high provisions for bad loans.

(Photo: AP)

new York The profit of the US investment bank Goldman Sachs has halved in the Corona crisis due to impending credit defaults and increased costs. Earnings fell 49 percent to $ 1.12 billion in the first quarter, the institute said on Wednesday.

In contrast, earnings decreased only one percent to $ 8.74 billion. Provisions for bad loans quadrupled to $ 937 million at the end of March, from $ 224 million a year earlier.

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Thousands of consumers apply for credit deferrals

ATMs

The savings banks alone have applied for more than 80,000 customers to defer their payments.


(Photo: dpa)

Frankfurt Thousands of consumers have applied for credit to be deferred in the Corona crisis. According to the Sparkassen- und Giroverband (DSGV), the savings banks alone have so far suspended interest and principal payments from 80,000 borrowers. Since April 1, banks who have been in need because of the crisis have had to pay interest, redemption or repayment of consumer and real estate loans for three months. The savings banks had introduced a goodwill arrangement a few days beforehand.

In the Commerzbank until April 6, 1.5 percent of the total consumer credit portfolio was deferred. The institute approves all applications for deferrals if they are made due to the corona crisis. Overall, the money house expects 10 to 20 percent of applications based on the total amount of consumer loans. According to their association BVR, the Volks- und Raiffeisenbank should also have received their first applications.

However, consumer defenders believe that deferral alone will not be enough. “Consumers also need a financial aid package that actually compensates for the losses they suffered as a result of the corona pandemic,” the Federal Association of Consumer Centers (vzbv) demands in a statement. Otherwise, the financial problems would resume after the deferral.

The bank customer must demonstrate that he has lost revenue due to the crisis and is therefore in an emergency, for example his maintenance is at risk. The deferral applies from April 1 to the end of June for consumer loans that were concluded before March 15.

According to consumer protection experts, the period until the end of June will still suffice. “It is foreseeable that consumers will continue to suffer from the pandemic and its consequences for a long time. They should therefore be protected longer than previously decided, ”warned the vzbv.

More: After the corona crisis, there will be tough distribution struggles. If it is not fair, the market economy loses the trust of its citizens, says Handelsblatt correspondent Martin Greive.

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The KfW rapid loan only starts after Easter

KfW in Frankfurt am Main

Aid must also be discussed with the federal government.

(Photo: dpa)

Frankfurt German small and medium-sized companies have to be patient a little bit before the Federal Government’s latest aid program starts. Because the KfW rapid loan, for which the state is fully liable, will only be available after Easter. “We are working flat out to make the KfW rapid loan available as quickly as possible, and we firmly assume that it will be that far in the week after Easter,” said Manuela Mohr, head of the online academy at KfW, in the expert call of the Handelsblatt on Wednesday afternoon.

Federal Finance Minister Olaf Scholz (SPD) had already announced the start of the program on Maundy Thursday. But that could not be implemented so quickly. “In addition to some technical points, other important details must also be coordinated with the EU Commission and the federal government,” explained Mohr.

The KfW Schnellkredit is aimed at small and medium-sized companies with more than ten employees, based on the information available to date. Companies with up to 50 employees should be able to receive up to 500,000 euros in credit, larger companies up to 800,000 euros. The state assumes full liability if a company cannot repay the loan.

A particularly important advantage of the loan is the maximum term: it should be ten years. With the previous special programs, companies should repay the loan within five years. In the opinion of many bankers, that would have overwhelmed many healthy companies.

According to a cabinet decision, the government also wants to extend the duration of KfW’s previous special programs, but that too has yet to be approved by the EU Commission.

14,000 credit inquiries from the German bank

Many companies are longing for the new funding instrument to help overcome liquidity shortages caused by the corona pandemic. Marcus Thiel, who heads Deutsche Bank’s promotional business, observes how big the interest of small and medium-sized companies is in the new funding instrument.

The interest of the companies has been enormous since March 13th: “In the first few weeks we received well over 50,000 inquiries related to corona. These are not always credit inquiries, but sometimes general issues such as short-time work, social security contributions or tax deferrals, ”he said in the expert call.

“In total, we received significantly more than 14,000 credit inquiries, although it was not always about promotional loans.” There are still other ways to provide customers with liquidity.

“Every fifth company in Germany could go bankrupt”

The new rapid credit should provide another boost. “Since the KfW rapid loan was announced, we have seen growing momentum again,” says Thiel. “We expect that there will be a very, very high demand as soon as this product is actually available.”

According to Mohr, there is no legal claim to promotional loans. “But we assume that the hurdles for approval from the house bank are low, since KfW assumes 100 percent of the credit risk,” she says. Nevertheless, the house bank is on board as part of the application and forwards the loan.

The details of the quick loan are not yet known because the federal government is still in coordination with the EU Commission, emphasizes funding expert Thiel. “But as long as the requirements are met, we see no reason why we should not apply for such loans for our customers.”

More on the subject:

Detailed information on Corona aid from the federal and state governments

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Applications for KfW loans are skyrocketing

The state development bank KfW

KfW loans amounting to EUR 20.8 billion had been applied for by Tuesday evening.


(Photo: dpa)

Frankfurt Corporations’ applications for corona relief loans to the KfW state development bank are skyrocketing. KfW loans totaling EUR 20.8 billion had been applied for by Tuesday evening – an increase of almost EUR 8.8 billion compared to the previous day, as KfW announced on Wednesday.

The main reason for the strong increase are twelve large applications for over 100 million euros, the total volume of which now amounts to 17.2 (previous day: 12.1) billion euros.

The tourism group TUI announced on Wednesday that it had signed a contract with KfW for a bridging loan of EUR 1.8 billion.

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Corona crisis: When real estate financing shakes

There are several ways out of this problem, also with legal help. Borrowers should carefully consider which step suits them in order not to regret decisions that will later have serious consequences.

“A liquidity bottleneck is always a highly individual problem,” says Niels Nauhauser, head of the pension fund, banks, and loans department at the Baden-Württemberg consumer center. The opportunities to get air are mainly related to the duration of the financial crunch and its amount. Affected parties should speak to their bank early on.

The lenders are interested in a long-term customer relationship and as few loan defaults as possible, says Horst Biallo, founder of the consumer portal Biallo: “The credit institutions are ready to make concessions to the borrowers in the current situation”, is his experience from discussions with credit houses.

Mirjam Mohr, head of the credit intermediary Interhyp, reports something similar: “We have a look at around 500 lenders and see that the vast majority endeavors to find solutions to problems.”

Many customers have already turned to their bank. A spokesman for the direct bank ING says: “We are currently receiving more and more general requests for repayment breaks and repayment reductions.” A spokeswoman for the Hamburger Sparkasse reports that several hundred private customers have already started suspending interest and repayment payments with construction finance.

“We are currently primarily concerned with supporting our private and corporate customers affected by the Corona crisis. Therefore, we ask for your understanding that we will unfortunately not be able to offer customers from other banks any construction finance in the near future, ”adds the spokeswoman. First the portal FinanzSzene.de reported about it. A demand from the Handelsblatt for other banks and financial service providers shows that many financial institutions continue to offer mortgage lending to new customers. In isolated cases, however, regional credit institutions would have decided not to accept new business or only accept it to a limited extent due to capacity constraints.

The legislator is helping

The new legal deferral rules of the federal government are now helping customers with existing mortgage loans: consumer loans and real estate loans that were concluded before March 15 can now suspend interest and principal payments – if someone is affected by the corona crisis. “The legal moratorium solves such problems in the short term, because borrowers can repay their installments later,” explains consumer advocate Nauhauser.

The deferral is initially valid for a period from April 1 to June 30. This may be extended. After the deadline, the deferred amounts are not due in one go, but the contract term is extended accordingly. Interhyp– Board member Mohr also observed that the credit institutions are willing to “the loan rates are sometimes longer than legally required”.

The possibility of deferral is not only available to borrowers who pay off their own property. Michael Neumann, CEO of the credit broker Dr. Klein explains: “Private landlords who may be in need themselves due to lost rent can check whether they can suspend payment of the building loan.” It is very important: “Nobody can just stop paying their installment”. Customers would have to demonstrate that the pandemic caused them to lose revenue to such an extent that paying the monthly installment would jeopardize their reasonable livelihood.

Suspend or change repayment

In addition, there are other options for real estate loans to adapt the financing to changing circumstances. It often depends on what was agreed when the contract was signed – or how accommodating the credit institutions are.

Portal operator Biallo believes that many borrowers do not necessarily have to stop their full monthly installment, i.e. interest and principal. “In the low interest rate phase, many mortgage lenders should already help if they suspend repayment and only have to make the interest payments for a while.”

However, if you have an older loan agreement with higher interest rates, that might not be enough – even if the interest portion of the monthly installment decreases, the further the residual debt decreases. Usually, the possibility of suspension of repayments is specified in the loan agreement. “Currently, the suspension of repayment is permitted under certain conditions even without a contractual agreement,” says a blog post by Dr. Small. Biallo has found that a number of banks even accept a suspension of repayments of up to six months.

A repayment rate change is also agreed in many loan agreements. Then a borrower can change the repayment amount. Dr. According to Klein, most banks only offer a one-time repayment rate change: “If repayment is to be increased again after the corona crisis, borrowers are dependent on the goodwill of the bank.”

Such options are often not provided for quick mortgage loans, where customers are rewarded for quick repayment with particularly favorable interest rates. The new statutory deferral rules also apply here. What makes sense in individual cases should be discussed with customers by their bank, Mohr advises from Interhyp: “Customers should know, however, that the term of a loan can be extended by reducing the repayment or deferral.” Where many real estate loans also offer flexibility , is for special repayments. Mohr emphasizes that it is now often possible to postpone even agreed special repayments.

Some banks offer their customers simplified access to installment loans in the corona crisis. Portal operator Biallo advises against taking out such a, usually more expensive, loan in order to service the mortgage. If it was just a matter of bridging a few months, borrowers could, in consultation with the bank, overdraw their checking accounts, says consumer advocate Nauhauser. “However, this is not a permanent solution because this type of loan is the most expensive.”
Help in the crisis is also available to customers who have signed a financing contract that has not yet been paid out – for example, because the purchase price is due later. As a rule, a loan agreement can be concluded up to six months before the payment is made, without the bank charging any commitment fees. Biallo calmed down: “Even if the borrower now faces short-time work, the bank should still pay off the loan.” Many institutes were flexible with regard to the start of repayments, for example.

It becomes more difficult if it is foreseeable that the borrower will have problems in the long term. Nauhauser advises: “If someone cannot permanently pay their debts, they should first check whether it makes sense to liquidate assets.” That could be life insurance. There may be business assets that can be deposited as security.

Last resort: property sales?

If need be, some homeowners might come up with the idea of ​​selling their home before a major price slide in the property market may occur. In a study by German bank It says: “For many people, the current situation is an unfamiliar psychological burden. We therefore expect that occasionally unsettled sellers and buyers could tend to overreact.” However, the experts advise against reflex actions: This is how Dr. Klein boss Neumann calculates not with a fall in house prices.

Some people will now postpone buying a house. However, it will probably not lead to price declines, but only to weaker rising prices or stagnation. Because the offer should also decline. A recovery from the pandemic could also lead to catch-up effects on the demand side. Biallo says: “Anyone who sells a house or an apartment under time pressure can only lose.” Nauhauser also warns: “Such decisions with serious consequences should be made carefully.” For most people, owning a home means much more than just one Investment. Often there is a lifelong dream that nobody should give up prematurely.

More: For which loans you can suspend payments in the corona crisis.

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KfW expects credit inquiries of 50 billion euros

Frankfurt The state development bank KfW expects a real rush on its corona development loans. “The volume will surely run up to 50 billion euros,” said KfW CEO Günther Bräunig in a conference call on Thursday. “I still cannot imagine whether it will really be 100 billion euros, but I would not want to rule it out either.”

By Thursday, KfW had received 2,432 loan applications, with which aid in the amount of EUR 10.6 billion had been applied for. The development bank has already committed around 750 million euros. But that’s just the beginning: From next Monday, KfW will not only be able to promise the loans to the banks, but will also be able to pay them out directly.

So far this has not been possible. Many institutes have therefore withheld their applications and do not want to submit them until Monday. “Then the big wave will start with small loans,” said the KfW boss. Ingrid Hengster, who is responsible for the domestic promotional business on the KfW board, assured: “We are set up so that we can process several thousand applications a day.”

Hengster and Bräunig assume that the majority of applications will be received in the next few weeks and that the run on corona loans will slow down again in May. The KfW Corona program can, however, be tapped until the end of the year.

The need is great. KfW economists expect Germany to inevitably plunge into a severe recession. “Our analysis shows that a real crash is to be feared, especially in the second quarter. Our estimate is minus ten to 15 percent, ”warned Bräunig. “Now it only matters how quickly we can achieve results with the special program.”

However, many business and banking representatives have complained in the past few days that the KfW programs exclude too many companies. “Loans under the KfW program can only be given to companies that are expected to be able to repay the loan within five years,” said Sparkassen President Helmut Schleweis in a recent interview with Handelsblatt. “This is currently not the case for many companies from industries that are suffering particularly badly from the corona crisis.”

No help for the weakest companies

The easiest way for companies to get promotional loans that they need the least, Schleweis criticized. “The companies that are currently most in need of help are often not suitable for promotional credit programs.” Bräunig is aware that the KfW program cannot help the weakest companies. “It’s not about getting credit for everyone who needs money,” he says.

Because even the house banks have to come to the conclusion in their risk assessment that the companies survive the crisis and can ultimately repay the loan. This is difficult at a time when nobody knows how long many shops are closed and events are prohibited.

graphic

KfW has therefore given the companies scenarios on the basis of which they should check whether a company has a “positive continuation forecast”, as the jargon says. The banks are expected to assume that a shop or company will remain closed for the next three months and that life will only begin to return to normal in July.

For 2021, the banks can again expect business to be reasonably normal. In a second test, the institutes are then asked to examine a stress scenario that deals with the question of whether a company can still repay its loan in five years if economic life remains practically closed for six months.

These hurdles are likely to be too high, especially for those industries that can hardly make up for lost sales, such as restaurateurs, hoteliers or companies from the event sector. In addition, many banks are very hesitant anyway. Many business and banking representatives are calling for the state to assume even more liability than it has already done: At present, state liability is capped at 90 percent for small and medium-sized companies, and 80 percent for larger companies. The DIHK had asked for a liability of 100 percent, which would violate the current EU aid rules.

Bank representatives also demand that KfW loans should be classified as subordinated liabilities. That would mean that in the event of bankruptcy, the banks could collect their old debts from the companies first – and the taxpayer would be left with all the greater losses.

Bräunig did not want to say specifically what he thinks of such demands. What is clear is that all these proposals would result in the state remaining stuck with much higher losses. “This is a political decision,” says Bräunig. KfW has bundled all of these suggestions and also sent the Federal Government an assessment of KfW. In addition to the Federal Government, the EU Commission would also have to approve further state aid for the economy. Bräunig did not dare to predict how this would work out.

In an interview with the Handelsblatt a week ago, however, Bräunig emphasized that the banks should also have a certain self-interest in giving their customers access to the KfW programs: “Ultimately, the banks also have other loans outstanding with most customers and have a keen interest that the company survives, ”he said. That is why it is also important for the banks that their corporate customers now receive further liquidity support from KfW.

Capped interest rate

In order for the promotional loans to pay off for the industry, KfW has come up with a complicated construct. The interest rate for companies is capped for most KfW special loans: for small companies, depending on the creditworthiness, it is between 1.0 and 1.46 percent, for larger companies between 2.0 and 2.12 percent.

These are special conditions of the corona crisis for companies that are far below the usual promotional interest rates. But the banks are left with more: they can calculate the part of the loan for which they are liable – i.e. between ten and twenty percent of the loan amount – with the usual, significantly higher interest rates. They may collect this interest. Anything that goes beyond this must be paid to KfW.

There are also bankers who consider KfW’s funding programs to be attractive. “Because the banks are also refinanced by KfW – currently at interest around the zero line, you can earn a reasonable amount of money,” says a bank that likes to grant promotional loans.

More: Many companies run out of liquidity despite short-time work or deferral of rent. KfW loans are supposed to help, but negotiations with banks are often tough.

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For which loans you can suspend payments

Home in Ludwigsburg

With real estate loans, consumers can currently have interest and principal payments suspended.

(Photo: obs / Accor Hotellerie Deutschland GmbH)

Berlin A lot of aid in the corona crisis comes directly from the federal government. The banking industry was obliged to take special measures to relieve consumers. What can the consumer expect? The most important questions and answers.

The loss of a job or short-time work can quickly lead to the consumer no longer being able to meet all financial obligations as before. Will the consumer be relieved when servicing his loans?
Yes, the Bundestag decided on March 25 that interest and loan repayments for consumer loan contracts that were suspended before March 15 could be suspended.

For which loans does this apply exactly?
It is about loan contracts that a consumer enters into for private purposes. This applies, for example, to installment loans, but also to real estate loans. The government is guided by paragraph 491 of the Civil Code. Promotional loans, employer loans and loans below 200 euros are exempt from the regulation.

For how long does the discharge apply?
Consumers affected by the Corona crisis can now suspend interest and principal payments. This initially applies to a period from April 1 to June 30. The deferral is legally ordered, so it applies immediately.

However, the banking associations recommend that you contact your bank or savings bank as soon as possible. Consumers have to prove to the bank that they have lost revenue due to the pandemic. In addition, according to the associations, consumers can then work with the bank on a solution to continue the loan relationship after the pandemic has subsided.

Will the previously deferred contributions then become due once after the deadline?
No, the contract term is extended accordingly. Currently by three months. If it turns out that this period is too short, the Federal Ministry of Consumer Affairs may, by authorization, extend the period for suspending interest and principal payments by a further three months until September 30th. The draft law even provides for March 31, 2021 as the end of a possible period. Default interest is not due during this time.

What happens if multiple borrowers have signed a loan contract?
If several borrowers are joint debtors and if the conditions for the deferral are met by only one of the borrowers, the creditor cannot demand the deferred amount from the other borrowers.

More: Rescue package in record time – How the federal government wants to save companies.

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What consumers need to know now

Dusseldorf It is a far-reaching judgment on the revocation of credit contracts that the judges of the European Court of Justice (ECJ) gave a few days ago. Some consumer advocates even call it pioneering. In fact, the judges significantly strengthened their backs by declaring standard bank cancellation policy not sufficient.

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 judgment

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.

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