Banking & Capital Markets Law

§Revoking a loan, even years later

If the revocation notice in a loan agreement is wrong, the 14-day revocation period never starts.

A consumer loan can normally be revoked within 14 days. The period only starts, however, once the borrower has received all mandatory information under § 492(2) of the German Civil Code (BGB) and Art. 247 §§ 6–13 EGBGB in clear and comprehensible form. If information is missing or wrong, the agreement can be revoked years later, even after the loan has been repaid.

On 9 September 2021 (C-33/20) the European Court of Justice ruled that banks may not rely on forfeiture or abuse of rights in such cases. Where several consumers signed, each of them holds the right of revocation.

• Typical errors: type of loan, net loan amount, out-of-court dispute resolution, default interest, calculation of the early repayment penalty.
• Frequently affected: agreements of Sparkassen, Sparda banks, Volksbanken and Raiffeisenbanken, building societies, Norisbank and Degussa Bank, particularly from 2011 to 2015.
• An example of a wrong net loan amount: an insurance premium financed with the loan is deducted from the loan instead of being included in the net amount.
• The effect of a valid revocation: no early repayment penalty, or a refund of one already paid, and an expensive old loan can be replaced at today's rates.

Banks almost always reject a late revocation at first. Whether it can succeed depends on the individual agreement. Send us the loan agreement and documents and you will receive an initial assessment.

§Early repayment penalties: avoiding or recovering them

The bank must not lose out through early repayment, but it must not profit from it either.

A loan with a fixed rate and a fixed term generally cannot be repaid early on one side's initiative. There are exceptions where legitimate interests require it, for instance when the mortgaged property is to be sold: notice is then possible at the earliest six months after full disbursement, with three months' notice. Better terms through refinancing, an inheritance or payment difficulties are not grounds for termination.

For terminating, the bank charges an early repayment penalty (Vorfälligkeitsentschädigung) to compensate for lost interest. The law prescribes no calculation method, so the amount is often disputed.

• If the information on how the penalty is calculated is wrong in a consumer loan agreement, the borrower owes no penalty (Federal Court of Justice, 28 July 2020, XI ZR 288/19). Amounts already paid can be reclaimed.
• If the initiative to repay comes solely from the bank, it has no claim to a penalty.
• General consumer loans such as instalment loans can be repaid early, in full or in part, at any time.
• A valid revocation (see above) removes the penalty altogether.

§Revoking car loans and car leases

If you financed a car through the manufacturer's bank, you can often still revoke the agreement today, return the vehicle and reclaim your deposit and instalments.

Car loans and finance leases must contain a correct revocation notice. Following court decisions and the ECJ judgment of 9 September 2021, many car bank agreements are defective, including those of Volkswagen Bank, Audi Bank, Skoda Bank, Seat Bank, BMW Bank, Mercedes-Benz Bank, Renault Bank and Santander. The Ravensburg Regional Court referred questions to the ECJ on Volkswagen Bank forms used by dealerships acting as intermediaries.

Revocation is particularly useful if the car is defective, the dealer refuses to repair it, or a diesel vehicle is affected: instead of litigating the purchase contract, the financing is unwound.

• You return the vehicle to the financing bank.
• The bank refunds the deposit and the instalments paid and loses its claim to contractual interest.
• Whether, and how much, compensation for use must be deducted is assessed case by case.
• The date the agreement was signed is decisive. We check in advance whether your legal expenses insurance covers the costs.

§Frozen or terminated bank accounts

A freeze without warning often hits the only account you have: rent, electricity and groceries suddenly cannot be paid.

Behind it there is usually a suspicion of money laundering, often triggered by transfers from abroad, for example from Russia, Turkey, Belarus, China, Cyprus or Malta, by cash deposits with no stated purpose, or by unclear ownership structures on business accounts. Once the bank has filed a suspicious activity report with the FIU, the Money Laundering Act (GwG) obliges it to keep silent. Your adviser may not even tell you the reason, and in our experience the complaints department does not help.

A bank may not freeze an account at will, even when it points to its general terms and conditions. The Money Laundering Act is tied to a specific transaction (§ 46 GwG), not to the customer's general use of the account.

• A lawyer's letter often leads to release; in one of our cases Postbank unfroze the account out of court as a result.
• If the bank does not respond, urgent court proceedings remain. In them the bank has to produce its suspicious activity report.
• A bank that freezes an account for weeks without a basis in the Money Laundering Act may have to bear the costs of the proceedings despite § 48 GwG (Frankfurt am Main Regional Court, order of 22 January 2024).
• If identity documents or proofs are missing, supply them at once. For business accounts, a clear statement of the beneficial owner helps.

As a rule, the bank must refund unauthorised debits after fraud unless the customer was grossly negligent. If the bank is too slow to contact the recipient's bank, it is liable for the loss.

§Reclaiming bank fees and custody charges

Silence is not consent: fee increases based on "deemed consent" clauses are invalid.

Many banks raised account, card and loan fees by writing to customers that a change would be deemed accepted unless they objected. The Federal Court of Justice declared such clauses invalid (27 April 2021, XI ZR 26/20). The Berlin Regional Court also held custody charges ("negative interest") on deposits to be inadmissible (28 October 2021, 16 O 43/21).

• Fees paid without a valid basis can be reclaimed, plus interest at 5 percentage points above the base rate.
• Claims become time-barred three years after the end of the year in which they arose, so check your bank's list of prices and services promptly.

§Credit brokers, add-on contracts and contract language

People who urgently need credit often sign much more than a loan agreement.

Dubious brokers advertise "credit without Schufa" or "no proof of income". Instead of a loan, the customer ends up with life, payment protection or unemployment insurance, a building society contract or a paid 24-month "economic advice contract", whose premiums and commissions are debited at once. Whether a broker holds the required trade licence can only be checked with the competent authority.

Refinancing in several steps rarely pays off either, because payment protection insurance and processing costs are charged again each time.

A bank must provide extensive information before the contract is signed, but the language risk lies with the customer: if you sign a German contract without understanding it, you are still bound by it. Have loan, property purchase and financing agreements reviewed before you sign.

§Investments: damages for poor advice

Even after a total loss, investors are not without protection.

Whether a claim exists depends on the contract: investment advice, asset management, execution with or without advice. Where advice was wrong, the investor is harmed at the moment of purchase, not only when the investment performs badly.

• Breach of duties to inform and advise, including in non-advised business if the client was not warned about the nature and risks of a product.
• Financial services provided without a licence under the German Banking Act (KWG); BaFin publishes warnings about such providers.
• False capital market information, such as an incorrect ad hoc announcement that determined the decision to buy.
• Faulty or late execution of securities orders by the bank.
• Closed-end real estate, ship, solar and wind funds, limited partnership interests, corporate bonds, profit participation rights and other atypical investments.
• Losses from unlicensed online gambling can be reclaimed from the operator (Giessen Regional Court, 21 January 2021).

§Broker fraud and online trading

If an online broker will not pay out and asks for further deposits instead, it is almost always fraud.

The pattern never changes: adverts on Facebook, Instagram, Telegram or "earn money via WhatsApp", an entry stake of €100 to €250, access to trading software that shows only a manipulated demo account, quick paper profits, then pressure to pay in more. At the latest when you try to withdraw, "fees", "insurance", "taxes", "financial monitoring" or a minimum balance of €10,000 to €20,000 are demanded.

• Warning signs: unsolicited calls ("cold calling", prohibited in Germany), payment via Bitcoin ATM, Paysafecard, Western Union or foreign accounts, no BaFin or EU licence, no legal notice (Impressum) on the website, offshore licences, remote-access software such as "AnyDesk".
• Act at once: stop all payments, report to the police or public prosecutor and to BaFin; if you paid by credit card or PayPal, try a chargeback.
• We review documents and payment routes, file criminal complaints for fraud and money laundering, work with the investigating authorities and pursue civil claims, including against the banks involved.

Take it seriously when your bank queries a foreign transfer: banks know recipient accounts from earlier fraud cases and, if alerted in time, can freeze them.

§Bank insolvency and deposit protection

If a bank becomes insolvent, deposits are protected by law up to €100,000, and in hardship cases up to €500,000.

One example is the insolvency of Greensill Bank AG in Bremen in March 2021, which had attracted savers through interest portals such as "Weltsparen" and "Zinspilot". Statutory compensation under the Deposit Guarantee Act (EinSiG) up to €100,000 is paid without an application. Beyond that, up to €500,000 is possible for particular life events such as divorce, retirement or illness, which requires a separate written application with supporting evidence.