Negative interest is dead; long live negative interest?
In two now published decisions of 4 February 2025 (XI ZR 65/23 and XI ZR 61/23), the banking senate of the Federal Court of Justice ruled on two general terms and conditions clauses on the basis of which the defendant banks had collected negative interest from private customers in the form of custody fees. According to the Senate, both clauses are invalid due to a lack of transparency.
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Custody fees for credit balances above a certain amount
Both defendant banks charged a ‘custody fee’ of 0.70% p.a. and 0.50% p.a., respectively, for credit balances on current accounts that exceeded allowances of EUR 5,000 and EUR 10,000. In one case, the imposition of the custody fee was limited to cases where only newly opened accounts and changes to the account model were involved. In the other case, it was limited to ‘new creation/new agreement’ scenarios.
More than just a payment services framework contract
The BGH regards the custody fee as the pricing of a main service under the current account agreement.
Insofar as the bank is obliged under a current account agreement to maintain a payment account for its customer and to execute payment orders, this is a payment services framework agreement. However, in the view of the Federal Court of Justice, this does not exhaust the range of services provided by the current account agreement. Rather, it is a mixed-type contract which – depending on the account balance – also includes the granting of loans and occasional custody.
The customer has a separate interest in the safe custody of cash balances that is independent of payment services, so that custody is a defining service under the current account contract. This is not altered by the customer’s obligation to make an advance payment for services the customer commissions the bank to perform, nor by the existence of a credit balance as a prerequisite for the execution of payments. The latter may be in line with banking practice, but it is not legally established. On the contrary, payment institutions without a ‘banking licence’ are not allowed to accept any deposits at all and would nevertheless execute payment transactions.
No review of price clauses
The Federal Court of Justice is continuing its previous case law, according to which only ancillary price agreements are subject to a legal review of the content of general terms and conditions. Contractual provisions regulating the fees for principal services, on the other hand, are not subject to a content review. The Senate consistently applies this principle and refrains from reviewing the content of the fee clauses at hand to determine whether they unreasonably disadvantage customers contrary to the requirements of good faith.
Strict requirements for transparency
However, fee rules for principal services that are based on general terms and conditions are not exempt from a transparency review. And it is precisely on this point that the BGH found against the deposit fees in question. The challenged clauses do not indicate with sufficient precision which credit balance the stated interest rate is calculated on. In particular, it is unclear whether the deposit fee is calculated on a daily basis and up to what point in time daily transactions on the current accounts are to be taken into account when calculating the relevant credit balance. The mere indication of the amount of the negative interest rate and the threshold above which the custody fee is charged does not enable the customer to determine the expected financial charges in advance or to check the amount of the fees charged.
The BGH also deemed the wording ‘new investment/new agreement’ to be non-transparent. It is likely to mislead existing customers into believing that if the threshold is exceeded, the bank is entitled to a custody fee even without a prior agreement by both parties.
The door is open for future negative fees
Contrary to many prophecies of doom, the BGH’s two rulings do not in fact put paid to negative interest rates. On the contrary, by classifying the custody service as the main contractual obligation under a current account agreement and consequently ruling that the withdrawal of a custody fee is not subject to review, the two rulings give banks the opportunity to legally charge custody fees in the future, provided they sufficiently observe the transparency requirements.
Impact extends far beyond custody fee clauses
The requirements formulated by the Federal Court of Justice regarding the transparency of the clauses are by no means limited to custody fee clauses. Rather, their significance extends far beyond the present issue of negative interest rates. The grounds for the judgment leave no doubt that – at least in the ‘territory’ of the XI. Civil Senate, namely banking, payment transactions and securities law – fee clauses based on general terms and conditions must specify all price-relevant factors in great detail and must be clearly regulated. As long as the determination of individual, even remote price-relevant parameters is not clearly regulated and thus left to the user’s unilateral non-contractual determination, there is a risk that the entire price clause will be invalid.
Further warning procedures inevitable
The strictness with which the Federal Court of Justice demands compliance with the transparency requirement will give consumer protection associations plenty of reason to issue written warnings and cease-and-desist letters. Not to mention a flood of claims for repayment.
