08. Apr 16

Withdraw from loans now: Right of withdrawal from legacy contracts to expire on June 21, 2016

Anyone who is still considering withdrawing from a loan ought to act now. The German Bundestag has resolved to do away with the option to withdraw. Thus, withdrawal is only possible until June 21, 2016.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: Many real estate loans that were concluded between 2002 and 2010 include flawed instructions concerning the right of withdrawal. As a result, the withdrawal period never commenced in a lot of cases and it is still possible to withdraw from these legacy contracts. However, the Bundestag decided on February 18 to do away with what it termed an “ewigen Widerrufsrechts” (perpetual right of withdrawal). Accordingly, withdrawing from legacy contracts is only possible until June 21, 2016.

Consumers who still wish to withdraw from a loan and benefit from the ongoing low interest rates should take action now. In order for withdrawal to be successful, the bank or savings bank needs to have made use of flawed guidance regarding the right of withdrawal. Even minor substantive or formal deviations from the respective standard instructions could mean that the consumer was not properly informed about his option to withdraw. As a consequence, it may still be possible to withdraw from the loan agreements in question. Should this be the case, an early repayment penalty does not need to be paid to the bank. On the contrary, in cases where loans were prematurely paid off by way of an early repayment penalty, it is often possible to retrieve this fee from the bank.

Consumers should nevertheless anticipate banks and savings banks not recognising withdrawal, arguing that the right of withdrawal has already been forfeited or exercised in bad faith. However, various courts have since refuted this line of reasoning and ruled in favour of consumers. In many cases involving faulty instructions on the right of withdrawal, it is possible to withdraw from the loan. Typical substantive errors featured in these instructions include e.g. ambiguous information concerning the commencement of a withdrawal period as well as the use of footnotes.

It is not always easy for consumers to determine whether they have been properly informed about their right of withdrawal. They can turn to a lawyer who is competent in the field of banking law to review the guidance they were provided on withdrawal and enforce any claims.

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