On April 27, 2021, the German Federal Supreme Court (Bundesgerichtshof – BGH) ruled that the amendment clause (which provides that the bank can change the terms of the contract with two months’ notice) of the general conditions of sale of German banks (AGB Banken – Banking T & Css) be âunfairâ and therefore unenforceable. The decision has far-reaching consequences as the vast majority of German banks rely on general banking conditions. With the detailed reasoning published on June 7, 2021, banks should start putting in place an action plan to deal with the consequences of this revolutionary decision. This Customer Alert explores the BGH’s decision and sets out to explore the initial repercussions and possible remedies.
In the appeal case to the BGH, the plaintiff, a consumer protection organization, originally sought a cease and desist order against the defendant, a Germany-based bank, for the use of cease and desist clauses. allegedly abusive modification in their general banking conditions. Under these amendment clauses, the bank had the right to modify the terms of all contracts with its customers, including, but not limited to, contracts for the provision of payment and investment services, without the explicit customer consent. The modification would become effective if the bank had warned the customer two months in advance. The bank had to tell customers that they could refuse the proposed changes, but if they refused, the bank could terminate the entire contract. Banks have often used this procedure to increase the fees for their services.
The modification clause in the banking T & Cs is in fact an implementation of articles 52 (6a) and 54 (1) PSD2. The Cologne Court of Appeal (Oberlandesgericht Cologne) therefore ruled in a 2019 decision that the modification clause was only a copy of the black letter of the law, the modification clause of the banking T & Cs was enforceable. Nevertheless, the BGH concluded that the amendment clause would not meet the test of fairness and reasonableness under the German implementation of Directive 93/13 / EEC on unfair terms in consumer contracts (the UTCCD). The BGH applied the judgment of the European Court of Justice (CJEC) in the case of DenizBank, in which the ECJ held that the relevant provisions of the Second EU Payment Services Directive (PSD2) would not limit the review by a national court of such amendment clauses.
Specifically, the court found that the wording of the amending clause was so broad that it would not only cover changes to minor details of the business relationship, but would allow the bank to rethink the the entire business relationship without the consent or involvement of the consumer.
The court argued that since the customer was deemed to consent to the changes proposed by the bank, the ‘deemed consent’ is in fact not so much ‘consent’ but rather a unilateral power of the bank to change the terms. of the contract, including modifications. that were not limited to minor modifications. According to the BGH, such inconveniences for customers cannot be remedied either by judicial review of the changed contract conditions or by the possibility for consumers to withdraw from the contract.
It should be noted that the BGH did not provide specific guidance on how to separate minor changes from major changes. While the court ruled that the changes in banking service rates would qualify as a major change requiring consumer consent, a considerable “gray” area remains. This will make it difficult for banks to reformulate the amendment clause in the banking T & Cs in a way that will be upheld by the courts.
As a consequence of the BGH judgment, all the existing modification clauses which have the same wording as the modification clause in the banking T & Cs could be inapplicable. In the German market, such change clauses are not only used in the banking sector, but also in other sectors. Therefore, the challenge is twofold: First, market players need to develop new amendment clauses which take into account the new requirements defined by the BGH and which can be used for future contracts with customers. Second, since modification clauses in the existing contract are inapplicable, these new modification clauses should be introduced in accordance with the general principles of contract amendments (i.e. by asking customers for their explicit consent).
The immediate reactions of market participants were very different. While some banks have removed the amendment clause, others have restricted the clause to contracts with professional clients only, and still others have left the amendment clause unchanged. Making such short-term adjustments to the amending clause for new business seems appropriate in order to avoid the potential risk of cease and desist letters from consumer protection associations. However, this will only be a partial and temporary solution. Indeed, one would expect that the Association of German Banks (Bundesverband deutscher Banken, BdB) to update the template for banking terms and conditions and thereby set up new standard change clauses for the German market to be used in the future. In terms of scope, such a clause should carefully separate minor changes – which would still not require explicit consent – from major changes – which now require explicit consent from the consumer. These major changes would include at least all changes to essential contractual obligations (i.e. services and payments).
More importantly, banks may consider developing a plan on how to remedy the unenforceability of the amendment clause in existing contracts, which may have led to the unenforceability of changes implemented under it. clause. When introducing a modification clause valid for existing customers, the same considerations apply as described above, i.e. particular attention should be paid to the question of the extent to which explicit customer consent will be required for future changes.
- Article 52 (6a) PSD2 reads as follows: Member States shall ensure that the following information and conditions are provided to the payment service user:
6. concerning modifications and termination of the framework contract: (a) if agreed, information that the payment service user will be deemed to have accepted the modifications of the conditions in accordance with Article 54, unless that the payment service user notifies the payment service provider before the date of their proposed entry into force date that they are not accepted; (â¦)
- Article 54, paragraph 1, PSD2 reads as follows: Any modification of the framework contract or of the information and conditions specified in article 52 is offered by the payment service provider in the same way as provided for in article 51, paragraph 1, and no later than 2 months before the proposed date of their request. The payment service user can accept or reject the changes before the date of their proposed effective date. ‘Where applicable, in accordance with Article 52 (6) (a), the payment service provider shall inform the payment service user that he is deemed to have accepted such changes if he does not inform the payment service provider before the date of their entry into force that they are not accepted. The payment service provider also informs the payment service user that, in the event that the payment service user rejects these changes, the payment service user has the right to terminate the framework contract free of charge. and with effect from any time until the date on which the changes would have applied. ââ©
- Decision of 19 December 2019 – 12 U 87 / 18.â©
- Judgment of the CJEC of 11 November 2020 – C-287/19).