Germany’ Federal Court of Justice ruling leads to invalidity of change clauses in the financial sector

According to a ruling by the BGH, amendment clauses in GTCs in the form frequently used in the financial sector must be adapted and newly agreed with the client.

In its ruling of 27 April 2021 (Ref.: XI ZR 26/20), the Federal Court of Justice (BGH) decided that clauses in the General Terms and Conditions (GTC) of banks that feign consent to contract amendments due to the consumer's lack of objection are invalid. Such clauses are usually found in all GTC of banks and other financial service providers.

Background and lower court OLG Cologne

The background to the ruling is a complaint filed by the Federal Association of Consumer Centres (Bundesverband der Verbraucherzentralen). In their opinion, such clauses refer to the entire contract structure and thus make it possible to change the essential contents of the contract to the detriment of the consumer. This was untransparent and thus a violation of the consumer protection provisions on the control of general terms and conditions.

The clause which the Federal Association of Consumer Centres attacked and which formed the basis of the BGH's decision read:

"Future amendments to these Terms and Conditions and the Special Conditions shall be offered to the customer in text form no later than two months before the proposed date of their entry into force.

If the customer has agreed an electronic communication channel with the Bank within the framework of the business relationship (e.g. Online Banking), the changes may also be offered by this means. The customer shall be deemed to have given his consent if he has not indicated his refusal before the proposed date on which the changes are to take effect. The Bank shall specifically draw the customer's attention to this effect of approval in its offer.

If the customer is offered amendments to the terms and conditions of payment services (e.g. terms and conditions for credit transfers), the customer may also terminate the payment services framework contract affected by the amendment without notice and free of charge before the proposed date of entry into force of the amendments. The Bank shall specifically draw the customer's attention to this right of termination in its offer."

Previously, the Cologne Higher Regional Court assumed that such contract amendment clauses were covered by Section 675g of the German Civil Code (BGB) because they corresponded to the wording mutatis mutandis. According to Section 675g (1) and (2) BGB, it may be agreed under further conditions that a payment service user agrees to an amendment of the payment service framework contract if he does not object within a specified period. The provision was enacted to implement the EU Payment Services Directives, which is why it was assumed that the provision was conclusive and that the application of the control of general terms and conditions was excluded.

Decision of the BGH

In its ruling, however, the Federal Supreme Court confirmed the view of the Federal Association of Consumer Centres. The clauses did not only refer to the payment service framework contract, but to the entire business relationship. Thus, the control of general terms and conditions was not blocked. Even in the abstract, Section 675g of the German Civil Code (Bürgerliches Gesetzbuch - BGB) does not supersede the AGB control under an interpretation of EU law. Due to the far-reaching possibilities to change the contract, such clauses deviated from the basic legal idea that silence is not consent. Particularly vis-à-vis unsophisticated consumers, such clauses would have the effect of a unilateral, content-unlimited power of amendment.

The Federal Supreme Court also rejected the objection that such clauses had not been challenged by the highest courts so far and therefore enjoyed the protection of legitimate expectations, arguing that such case law did not have a binding effect comparable to that of statutory law.

Consequences of the judgement

According to the ruling of the BGH, such contract amendment clauses are invalid and require an adjustment. There is currently no clarity as to which adjustment can now be made in order to create a transparent regulation (for consumers) on the one hand and to make the mass traffic of financial service providers manageable on the other. Advice on the individual possibilities and risks is therefore important.

The validity of new GTCs containing such adjustments must now be expressly agreed with the consumer.

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