The BGH will presumably declare processing fees for loans inadmissible. Lawyers and consumer advocates rejoice and credit borrowers with reimbursements of up to 21 billion USD. However, the BGH has left the essential questions unanswered so far and that could remain so. The discussion is developing into a playground for jurists far from reality.
Loans do not become cheaper for consumers if jurisdiction prohibits processing charges. This is confirmed by a look at the practice: Several years ago, several higher regional courts declared charges mostly 1.00 to 5.00 percent of the net loan amount inadmissible, and banks actually abolished the processing fees on a massive scale , In return, however, the borrowing rates were increased, so that the effective interest rate remained constant or even higher.
The limitation period determines the potential of old cases
A disadvantage arises for borrowers by the processing fee only if the loan is repaid prematurely. Then the effective interest rate increases retroactively because the fees are not reimbursed. Nevertheless, borrowers can in the past be reimbursed for paid fees if the BGH remains as expected in its appraisal. Before that, however, there are still many questions to be answered.
First, it is unclear for which period fees can be retroactively refunded. In principle, a three-year limitation period applies: all fees paid up to 31.12.2010 would then be lost. Some courts are of the opinion that consumers can claim back the fees for a period of ten years. Only with such an interpretation would banks and savings banks expect claims in a sensitive amount.
Is the retroactive refund proportionate?
In the period in question, loans totaling approximately USD 1400 billion were expected to have been issued in Germany. Assuming an average processing fee of 1.50 percent, the claims could amount to 21 billion USD. How high the amount was, however, can only be guaran- teed as well as the share of borrowers who actually assert their claims.
If the case law broadly sets the period of reversion for the benefit of borrowers, then the banks will be able to pursue and defend severe laws against the Federal Constitutional Court. This would then have to decide whether the full repayment of processing fees for a long period of time is appropriate.
Borrowers have incurred no damage
After all, most customers were not disadvantaged by the fees: if the fees had previously been banned, borrowers would have paid higher debit interest rates. The reimbursement amounts to a judicially imposed, retroactive price reduction, although at least in the overall consideration of all cases objectively not too much has been paid. It is hard to imagine that this will be implemented for a debt of several or even many billions of USD.
The lay lawyer notes that the legislature has implicitly declared loan costs in the Price Indication Regulation that are not equal to debit interest. Thus, the effective interest rate under the Regulation means that the cost of a loan must be calculated as the “total cost of interest to be borne by the borrower and all other costs, including any intermediation costs”.
Does the legislature implicitly include processing fees?
The law knows next to interest and agency costs also “other costs”. At the same time, the Pricing Regulation removes the costs “for the management of an account” and “for insurances and other additional benefits” from the consideration in the effective interest rate, and therefore also knows these costs. So what, if not processing fees, is “other costs” then? Legally, this consideration may be obsolete, it is not commercial.
The discussion is led by legal scholars and not by business economists. The latter, at least during their apprenticeship, have experience with capital and cash values and know that, from the point of view of the lending bank, there is no substantial difference between the total price of a loan and interest or only a higher one. Compounded interest.