Finally, more attention to customers?: Bafin takes action on premium savings contracts

Finally more attention to customers?
Bafin takes action on premium savings contracts

In the past, savings banks and banks often abandoned customers with insufficient interest rates for the premium savings contracts they offered, as per the BGH decision. But they do not want to give it. The FSA now wants to take action.

In the year-long dispute over interest on premium savings contracts, the financial watchdog Baffin is taking action. Credit institutions must inform the annuity savings customers of the ineffective interest rate adjustment clauses and determine whether they have received insufficient interest as a result, as evidenced by the authority’s general decree now published.

In these cases, financial institutions must irrevocably guarantee their customers a retroactive interest calculation or provide an adjustment contract with an effective interest rate adjustment clause. “Because the amicable resolution with the banks failed, we had to respond to this consumer protection complaint with a public decree,” Baffin CEO Thorsten Buch explained. However, affected financial institutions can file an objection to the general decree to Bafin.

The struggle for long-term savings contracts

The conflict revolves around the long-term savings contracts that were introduced between 1990 and 2010. The contracts contain clauses that give financial institutions the right to unilaterally change the guaranteed interest rate. The Federal Court of Justice (BGH) declared the clauses ineffective in 2004 and commented on the requirements for such clauses in subsequent decisions in 2010 and 2017. However, the details remain controversial. Consumer advocates accuse the savings banks in particular of lowering interest rates on their own initiative with the help of interest rate adjustment clauses. German savings banks and the Giro Association (DSGV) have stressed in the past that the case law of the German Gulf Bank since 2004 was “appropriately implemented in the affected savings contracts and thereafter”.

As early as December 2020, the financial regulator and consumer advocates announced that they would toughen their actions against potentially illegal interest rate cuts on long-term bank savings contracts. They called on consumers with so-called premium savings contracts to review their contracts for unacceptable interest rate adjustment clauses and take legal action against them. Since the roundtable “did not offer any customer-friendly solutions” for greater transparency, Bafin is now also considering “specific management options” against banks.

Variable interest installment savings contracts are allowed, but banks must use the general reference rate as a basis and move forward transparently when interest rates change. According to financial supervisors, many older contracts—particularly those of savings banks—contain clauses for unilateral rate cuts that no longer align with case law.

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