Banking sector in turmoil: The invalidity of the GTC amendment mechanism – Quo vadis?

In its ruling of 27 April 2021 (case ref.: XI ZR 26/20) in response to cease and desist action brought by the Federation of German Consumer Organizations, the German Federal Court of Justice (BGH) found two clauses in the general terms and conditions (GTC) of banks to be invalid. The clauses (analogous to the GTC of savings banks) assumed that the customer consented to an amendment to the general terms and conditions, the special terms and conditions and the fees without any restriction as to content if the customer did not object to this at least two months before the proposed effective date.

This puts an end to the common practice of unrestricted amendments to fee provisions and other contract terms on the basis of "fictitious consent", which is based solely on silence in response to an offer to amend the GTCs.

Banks and savings banks must therefore not only prepare themselves for significant costs and build up reserves, but also fear further (model declaratory) actions and potentially even European representative actions due to the (alleged) incorrect implementation of the decision.

The decision applies to all forms of banking, individual business relationships (e.g. saving transactions, securities transactions, payment transactions, MasterCard, VisaCard), payment service providers, and other sectors where fee increases are implemented by means of fictitious consent.

The storm this decision has caused is being fed by more and more new consumer-friendly rulings. On the Internet

  • consumer lawyers urge consumers to have the general terms and conditions and the latest amendments professionally reviewed and to reclaim the bank fees;
  • companies advertise the purchase of the repayment claims or the assertion against a percentage share;
  • the Federation of German Consumer Organizations asks consumers to inform them via an anonymized online portal how the bank or savings bank has reacted to the BGH ruling so that it can evaluate and decide “whether, how and against whom further legal action will be taken”.

What did the BGH decide?

Up to now, court rulings and literature have mainly assumed that Section 675g (2) Sentence 1 of the German Civil Code (BGB), which provides that payment service framework contracts may be amended by fictitiously assuming the customer's consent, excludes the application of a content review under the laws on general terms and conditions.

The BGH found that Sections 307 et seq. of the German Civil Code apply additionally. It stated that the disputed clauses deviated from the fundamental principle concerning the conclusion of contractual amendments (Sections 305 (2), 311 (1), 145 et seq. of the German Civil Code). The fictitious assumption that silence constitutes acceptance of a contractual amendment unreasonably disadvantages the customer (Section 307 (1) Sentence 1, (2) No. 1 of the German Civil Code), as it would lead to a unilateral power to make changes without restrictions as to content and a shift in the equivalence ratio of performance and consideration to the customer's detriment.

Applicability – scope and limits

The BGH expressly declares the contract amendment clauses to be invalid "in relations with consumers". It is not clear from the ruling whether legal business transactions are also to be covered. What argues against this is that the BGH refers to the Deniz Bank decision of 11 November 2020 (C-287/19) in which the European Court of Justice based the primacy of the GTC control over the payment services law on the directive on unfair terms in consumer contracts (Directive 93/13/EEC). However, this cannot be applied to entrepreneurs. Furthermore, in legal transactions with entrepreneurs, a different standard applies when GTCs are assessed; they can also become part of the contract tacitly or by conclusive behavior (BGH, judgment of 12 February 1992 – VIII ZR 84/91). 

Which fees are covered?

Repayment claims on the grounds of unjust enrichment (plus interest) may be asserted in relation to all fees levied or increased on the basis of the disputed clauses, for example account management fees, transfer fees, card fees, custody and order fees, charges for failure to meet minimum salary receipts, etc. They can be asserted not only by current customers, but also by former customers, which will likely revive contacts that were not terminated amicably. 

When does the defense of the statute of limitations apply?

An issue of particular controversy is the question of which repayment claims can be countered by the defense of the statute of limitations; and this is precisely one of the points for which the recent case law of the European Court of Justice could become relevant. There is consensus that claims become time-barred after three years (Section 195 of the German Civil Code). However, it is unclear when the limitation period begins to run.

There are two alternatives: either the limitation period commences at the end of the year in which the fee was charged, or at the end of the year in which the decision of the BGH was issued, i.e. at the end of 2021.

In the first case, repayment claims regarding payments made prior to 1 January 2018 would be time-barred. The limitation period for repayment claims in relation to fees introduced or increased in 2018 would have started at the end of 2018, so that any such claim would become time-barred on 31 December 2021.

In the second case, repayment claims could be asserted until the end of 2024. There would only be a restriction insofar as only payments from the last 10 years can be claimed back (Section 199 (4) of the German Civil Code). Since this maximum period begins on the exact relevant day and has to be calculated according to Section 187 ff. of the German Civil Code, a fee charged on 8 September 2011, for example, would become time-barred on 8 September 2021. Claims for repayment would therefore also be possible for amounts paid before 1 January 2018.

The decisive factor is whether the legal situation was unclear until the decision of the BGH and thus made it unreasonable for potential claimants to pursue legal action. However, the fact that there were no rulings of the highest court instances that considered the fictitious consent to be permissible argues against this. This is also pointed out by the BGH (no "explicit approval"). Following the above-mentioned Deniz Bank decision of the European Court of Justice at the latest, it was clear that reviewing the clauses under GTC law was permissible. The underlying objectives of the statute of limitations, i.e. public peace and legal certainty, require that high standards be set for the existence of an unclear legal situation. 

Recently, rulings of the European Court of Justice of 10 June 2021 (case ref.: C-609/19 and C-776/19 to C-782/19) have been cited to support the opposing view. According to these rulings, reimbursement due to unfair terms must not become time-barred before consumers could even realize that they might be entitled to reimbursement. It is questionable whether the ruling of the European Court of Justice, which was concerned with a specific case scenario, can be attributed such far-reaching relevance for the interpretation of the German statute of limitations rules. However, the discussion shows the permanent threat posed by the BGH's decision, especially for the banking world.

How can repayment claims be asserted?

For most consumers, it will hardly be economically attractive to claim fees in the two- or three-digit range by taking individual legal action. In addition to the known class actions by a large number of plaintiffs, representative actions could become important in the future. The Directive on representative actions (EU) 2020/1828, published in the Official Journal on 4 December 2020, is to be transposed by the member states by 25 December 2022, and applied by 25 June 2023. In addition to the right to bring an action for injunctive measures, it provides consumers with a legal right to performance ("remedies such as compensation, repair, replacement, price reduction, contract termination or reimbursement of the price paid") and therefore a form of collective action for performance.

Transposition – coming to terms with the past and next steps

In practice, there is a variegated picture of reactions to the BGH's decision: planned fee introductions or increases are being suspended retroactively, corresponding clauses are being removed from the GTC without replacement, customers are being asked to give their consent (for example in online banking), etc.

How can GTC changes and fee increases be agreed in the future?

In new customer business, the use of the disputed clauses should be avoided by deleting them in the GTCs, including on the homepage. 

As far as the necessary rewording of the GTCs is concerned, it should be noted that the BGH has emphasized that formulations of amending clauses which limit and make the original provision more specific are permissible. Therefore, fiction solutions that are worded in a manner ensuring the necessary balance and transparency are still permissible.

If the customer's consent is required, electronic solutions are an option. To make such consent appealing to customers, linking it to benefits can be considered. Separate offers of various services or the development of new products are also conceivable. Depending on the situation, the consent can also be based on the future use of services.

In the case of refusal of consent, (ordinary) termination of the contractual relationship may be considered in individual cases, but this requires a valid agreement on a corresponding right of termination.

How to handle repayment claims?

The BGH does not require any refund without a corresponding request from the customer.

If such demands are made, it must first be determined whether the relevant underlying amendment clause actually falls short of the BGH's requirements with regard to effectiveness. 

Furthermore, apart from the question of the statute of limitations, it must be verified whether the fee increase or fee change became part of the relevant contract through the customer's (implied) consent. On the one hand, this may generally be the case if, for example, customers have changed account types or if they opened their account free of charge, e.g. as students, and it was therefore already clear when they opened their account that certain fees would have to be paid later. On the other hand, it must be verified in each individual case whether or not consent was given in the course of individual conversations or correspondence, e.g. via an offer to switch accounts.

Depending on the situation, it may also be permissible to require the waiver of reimbursement claims in return for the granting of benefits.

The consequences of the BGH's ruling on the invalidity of the GTC amendment mechanism therefore depend significantly on whether the scope, but also the limits, are properly interpreted and applied.

Authored by Ingrid Andres.


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