Loans can be tied to a specific purpose when they are issued. A case involving withdrawal from a loan tied to what is termed a “verbundenes Geschäft” [linked transaction] will come before the Bundesgerichtshof (BGH), Germany’s Federal Court of Justice, on May 31 (Az.: XI ZR 511/15).
GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: It is generally possible to withdraw from a loan if the bank or savings bank made use of flawed guidance concerning the right of withdrawal. The end result is that the loan agreement is then rescinded and both parties return any services received. The effect of this get-out-of-jail-free card in the context of a so-called “verbundenes Geschäft” is an issue that the Bundesgerichtshof will have to grapple with on May 31.
The case concerns an investor who invested in a closed-end fund in October 2004. He was only able to finance half of this investment using his own financial resources and took out a loan to cover the other half. This was fully paid off by him in March 2010. He then withdrew from the loan agreement almost four years later. Due to the fact that the bank had made use of flawed guidance on the right of withdrawal, the withdrawal period had never commenced and his withdrawal had been carried out effectively. He therefore brought a legal action for rescission of his capital investment linked to the loan plus compensation for use at a rate of five per cent above the base rate, pari passu with the transfer of the investment. His action was partially successful before the court of second instance. The Oberlandesgericht (OLG) Hamburg [Higher Regional Court of Hamburg] awarded him a portion of the desired amount as well as compensation for use at a rate of 1.3 per cent p.a. in exchange for ceding all rights arising from the investment.
In justifying its decision, the OLG stated that the guidance used by the bank regarding the right of withdrawal made no reference whatsoever to the linked transaction in question and was thus flawed, and the withdrawal had therefore been effectively carried out on time. The Court held that the fact that the loan had already been fully paid off before the withdrawal took place did not preclude recourse to the right of withdrawal. It went on to say that this had neither been forfeited nor exercised in bad faith. The BGH must now rule on the bank’s appeal.
Generally speaking, it is possible to withdraw from loans if consumers were not properly informed about their withdrawal options. Lawyers who are experienced in the field of banking law are able to assess whether the conditions for loan withdrawal have been met.
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