When drafting general terms and conditions (“T&C”), the “opponents” are generally your contractual partners as well as consumer associations. Credit institutions, payment services providers and other financial services providers should also consider BaFin to be their potential “opponent” as a result of the German Financial Services Supervision Act (Finanzdienstleistungsaufsichtsgesetz “FinDAG”) as well as a very broad interpretation of the FinDAG by BaFin.
Pursuant to Section 4 para. 1a sentence 2 FinDAG, BaFin can issue official orders to prevent or eliminate abuses affecting consumer protection if, in BaFin’s view, general clarification is required in the interest of consumer protection. An abuse is defined in Section 4 para. 1a sentence 3 FinDAG as a significant, permanent or repeated breach of consumer protection laws, which due to its nature or scope, can endanger or negatively affect the interests of more than merely individual consumers (“Abuse”).
In an article entitled Invalid interest rate adjustment clauses – where do we go from here?“ contained in the BaFin Journal of February 2020 (“BaFin Article”), BaFin named the use of interest rate adjustment clauses in so-called premium-aided savings agreements between consumers and savings banks as an example for an Abuse, as in BaFin’s view such clauses are in contravention of the German Federal Supreme Court’s current case law on interest rate adjustment clauses. In BaFin’s view, parties using such interest rate adjustment clauses need to inform the relevant consumers and find “appropriate solutions”. If such clauses are continued to be used without any form of communication, BaFin believes this would warrant an official order pursuant to Section 4 para. 1a sentence 2 FinDAG.
What is noteworthy regarding this example is that there are still open legal questions regarding the topic of interest rate adjustment clauses that are the subject of non-legally binding class action law suits.
In the BaFin Article, BaFin establishes itself as an additional complaints body for consumers, in addition to lawyers and consumer associations, with respect to allegedly invalid interest rate adjustment clauses. Based on the complaints received, BaFin will assess the situation and then potentially take further action in order to “eliminate” any existing Abuse.
What remains unclear is what sort of official orders or measures BaFin will take. The legal basis enables at least official orders that are “required” in BaFin’s view. Any reliable predictions can probably only be made once an administrative practice has been established.
Bridge to payment and other financial services providers
Section 4 para. 1a sentence 2 FinDAG enables official orders targeted at companies who are regulated by BaFin pursuant to the German Banking Act (KWG), German Payment Services Supervision Act (ZAG), German Insurance Supervision Act (VAG), German Securities Trading Act (WpHG), German Investment Management Code (KAGB) and other laws (“Regulated Companies”). Regulated Companies include payment services providers, banks, insurance companies, securities service providers and other financial services providers who are regulated by BaFin. The invalidity of interest rate adjustment clauses is based on legal rules regarding T&Cs (in particular, the transparency requirement and the equivalency principle regarding contractual amendments). These rules are not limited to interest rate adjustment clauses but also include other clauses of T&Cs.
In light of this, we believe that there are good reasons why the statements made by BaFin in the BaFin Article can be transferred to other T&Cs that are used by regulated companies for their consumer contracts.
The BaFin Article shows the supervisory law dimension of T&Cs as well as the requirement to take a close look when drafting T&Cs from a supervisory law perspective. The use of T&Cs that are in contravention of existing case law bears the risk for Regulated Companies that BaFin will take supervisory measures. Additionally, Regulated Companies are required, for supervisory reasons, to follow developments in case law relating to T&Cs and in case of any adverse rulings, approach the relevant consumers – as described in the BaFin Article – and find solutions with those consumers. Any open legal issues regarding the relevant T&Cs do not offer sufficient protection against measures adopted by BaFin.
Cover picture: Copyright © Adobe Stock / fotoheide, adapted by PayTechLaw