A decision of the ECJ of 26. March 2020 (Az. C-66/19) revives the debate on the effectiveness of revocation notices in loan agreements. In dispute is the so-called cascade reference to § 492 para. 2 BGB.
A ruling by the European Court of Justice (ECJ, Az. C-66/19) on the revocation of private loans has caused an uproar among banks and consumers. The ECJ had ruled that a widespread clause, the so-called cascade reference, in the revocation instruction of real estate loans and car financing was not compatible with European law.
Cascade reference in revocation instructions
In dispute was a revocation instruction of Kreissparkasse Saarlouis. As with many other banks, the bank used a legal model in which the following passage was found:
The period [for revocation] starts after the conclusion of the contract, but only after the borrower has provided all mandatory information pursuant to Section 492 para. 2 BGB (z. B. information on the type of loan, information on the net loan amount, information on the term of the contract) has received.
The cited norm, § 492 para. 2 BGB, again refers to Art. 247 §§ 6 to 13 Introductory Act to the German Civil Code (EGBGB). The borrower who wanted to find out about his rights must therefore read the regulations listed there – which in turn refer to other paragraphs.
The Federal Court of Justice had deemed this so-called cascade reference permissible, because the standards to which reference is made are "readily accessible to anyone", so that the customer can easily see them (z.B. BGH, judgment of 22. November 2016 – XI ZR 434/15, para. 19).
This view has been heavily criticized because the chain of references is hardly comprehensible to laypersons. These concerns were shared by the Saarbrucken Regional Court, which had to rule on the revocation instruction of the Kreissparkasse, and referred the matter to the ECJ by decision of 17. January 2019 the question before whether the cascade reference was compatible with European law, in particular the Consumer Credit Directive.
ECJ overturns BGH case law
The Court ruled that a reference to a provision which itself refers to other legislation is not sufficiently clear and comprehensible. Central to the decision are the following considerations (paragraphs 44 and 47):
Where a consumer contract refers, as regards [mandatory] information …, to certain provisions of national law, the consumer cannot, on the basis of the contract, determine the scope of his contractual obligation or verify whether the contract which he has concluded contains all the information required by that provision and, a fortiori, whether the withdrawal period, of which he may dispose, has begun to run for him ..
Thus, a mere reference in general contract terms to legislation that sets forth the rights and obligations of the parties is not sufficient ..
(ECJ, judgment of 26. March 2020 – Case C-66/19)
Consequences for borrowers
What significance does this now have for borrowers whose contracts contain a revocation instruction with the reference to § 492 para. 2 BGB included?
Banks block borrowers who want to revoke their contracts with reference to the decision. In doing so, they can u.a refer to a decision of the OLG Stuttgart (decision of 05. April 2020 – 6 U 182/19), which – to put it simply – refers to the fact that the clause objected to by the ECJ originates from the model revocation instruction of the German legislator, on which the lender may rely. Like all directives, the consumer credit directive should be seen in the context of the relationship between private individuals (resp. between borrower and lender) not directly applicable. The wording of the German regulation is clear.
Other courts indicate that they will follow ECJ case law and find the offending clause invalid in the future.
Examination by lawyer makes sense
Borrowers who want to know whether or not their contract can be revoked should seek expert help. You are free to consult attorney Dr. Henning Kahlert, attorney and specialist lawyer for banking and capital market law in Karlsruhe, will be pleased to assist you.
Attorney Dr. Henning Kahlert is a specialist lawyer for banking and capital market law in Karlsruhe, Germany.