13. Apr 16

Withdrawing from loans: Bundesrat favours longer transitional period for legacy contracts

The controversial plans to do away with what is termed the “ewiges Widerrufsrecht” (perpetual right of withdrawal) in cases involving real estate loans have been met with criticism from political quarters. The Bundesrat (the upper house of the German parliament) considers the case for a longer transitional period to be justified.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: The Bundestag has passed the Gesetz zur Umsetzung der neuen EU-Wohnimmobilienkreditrichtlinie (Act Implementing the New EU Directive on Residential Property Loans). The new Act is expected to come into force on March 21. Among other things, this is set to bring an end to the so-called “ewiges Widerrufsrecht” in cases involving real estate loans on June 21, 2016. The Bundesrat has since criticised the speed with which the option to withdraw is being done away with. It believes that a longer period before the right of withdrawal expires would be appropriate in cases involving legacy contracts. As will be the case for new contracts, a period of one year and 14 days could also be applied to legacy contracts so that consumers are not disproportionately restricted. However, the likelihood of this suggestion being incorporated into the Act is fairly low.

If the Act is adopted as planned, consumers who still want to withdraw from their real estate loans will have until June 21, 2016 to do so. For this reason, they ought to act now. Should problems arise with banks or savings banks, consumers can turn to a lawyer who is competent in the field of banking law.

In principle, it is often possible to withdraw from a consumer loan if the bank has made use of flawed guidance regarding the right of withdrawal. According to research conducted by the Verbraucherzentrale Hamburg (Hamburg Consumer Advice Centre), around 80 per cent of real estate loans concluded between 2002 and 2010 include flawed guidance on the right of withdrawal. The reason for this is that the banks and savings banks did not strictly adhere to the respective standard instructions. As a result, the withdrawal period never commenced in many instances, which means that it is still possible to withdraw from legacy contracts in a lot of these cases. Withdrawal enables consumers to restructure their debts under favourable circumstances and benefit from the ongoing low interest rates.

Given that the option to withdraw is no longer likely to be available come the summer, it is to be expected that banks and savings banks will not simply accept withdrawal and instead play for time. Consumers should nevertheless seek legal advice and not be discouraged by this, as the legal situation is clear in many cases.

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