Ways out of real estate financing

Ways out of property financing – No early repayment fee in case of insufficient information on the calculation of the VFE

Anyone who terminates their property financing prematurely must regularly pay a so-called prepayment penalty. Consumer protectors have been doubting the legality of the amount of compensation for a long time and have only recently been confirmed in their assessment by a recent judgement of the OLG Frankfurt, Ref.: 17 U 810/19.

 

What was the disputed case about?

The defendant – a Frankfurt credit institution – had previously charged the borrower an early repayment fee. He now defended himself in court and was upheld by the Frankfurt Higher Regional Court in the second instance. In the contested case, the defendant infringed its legal obligations to provide information. Thus, at no time was the borrower under any obligation to pay the early repayment penalty and the sums already paid could be recovered.

 

What are the legal obligations to provide information?

The judgment does not fundamentally attack the practice of early repayment fees. A bank should still have the right to an “appropriate early repayment penalty for the loss directly related to the early repayment”. However, the judgment should now strengthen the position of the borrower by imposing correspondingly high requirements on an early repayment indemnity clause.

 

The contractual details for the calculation of the early repayment fee should therefore be inadequate within the meaning of § 502 para. 2 No. 2 BGB if they are “not clear, concise, understandable and precise” for the borrower. The provision applies both to general consumer loan agreements (see Art. 247 §7 (1) No. 3 EGBGB) and real estate consumer loan agreements (see Art. 247 §7 (2) No. 1 EGBGB). The consumer could therefore expect a differentiated description in the contract of the procedure for calculating the early repayment fee. Only the presentation of the calculation in its main features does not meet this requirement.

 

The disputed loan agreement provided for interest to be paid on the prematurely repaid loan capital on the basis of the interest rates of the corresponding mortgage Pfandbriefe available on the capital market, “insofar as Pfandbriefe with corresponding maturities with matching maturities are available”. It remained open, however, how the calculation would be made if no Pfandbriefe were available, for example with maturities of less than one year. This is incomprehensible to the consumer and he cannot therefore draw any conclusions about the calculation of the early repayment penalty in his particular case. Nor can traceability be restored retrospectively by, for example, an information sheet on the calculation of the early repayment penalty sent at a later date.

 

It is estimated that hundreds of thousands of contracts contain insufficient information to calculate the early repayment fee, which means that borrowers now have the possibility to defend themselves against an early repayment fee or to reclaim payments already made.

Have you also paid or been asked to pay early repayment fees? Or would you like to terminate your loan prematurely and have not yet done so because of a possible early repayment penalty?

As a law firm specialising in banking and capital market law, we would be happy to review your loan agreement and give you an initial assessment of possible further action. If you are interested, please contact us by e-mail, using the form on our website or by telephone.

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