1. Introduction
In a world where economic conditions can change quickly, long-term financial obligations such as loan agreements, car loans and consumer credit often represent a significant burden.
The ruling of the European Court of Justice (ECJ) of March 26, 2020 (Case C-66/19) could offer many borrowers an opportunity to free themselves from these financial burdens.
Under certain circumstances, the ruling opens up the possibility of revoking a loan agreement, which would mean a retroactive cancellation of the contract.
The conditions under which such a revocation comes into question will be examined in this article.
2. The case law of the ECJ in the judgment of March 26, 2020
The ECJ ruling of March 26, 2020 has far-reaching consequences for loan agreements.
At the heart of the judgment is the so-called “cascade reference”, a specific wording in loan agreements. This wording concerns banks’ information obligations towards consumers. The ECJ ruled that inadequate or misleading wording regarding the cancellation period and rights allowed the loan agreement to be canceled. The legal consequence is that under these circumstances, borrowers can still revoke their contract even years after it was concluded.
3. Affected contracts
This ruling particularly affects consumer loans and car loans that were taken out after June 11, 2010.
An important exception are real estate loans, for which the legal situation has not yet been conclusively clarified. The affected contracts often contain incorrect or unclear wording regarding the right of withdrawal, which gives borrowers the right to withdraw from the contract even after years.
The corresponding wording is:
“The period begins after the conclusion of the contract, but only after the borrower has received all the mandatory information in accordance with Section 492 Paragraph 2 of the German Civil Code (e.g. information on the type of loan, information on the net loan amount, information on the contract term).”
If your contract contains this wording, you should consult a lawyer as soon as possible and discuss your options with him (depends on the contract).
4. Borrower options and approach
Various options open up for borrowers whose contracts contain the relevant wording.
The first step is to check the contract for the relevant clause.
If this is available, the borrower can revoke the contract.
This leads to the reversal of the contract, which means that the interest and repayments already paid can be reclaimed.
It is advisable to seek legal advice for this process, as once the legal consequences have been triggered, they cannot be reversed. If there are also security interests, mortgages, etc., this can lead to complications and, in the worst case, disadvantages for the revoking party and the borrower.
5. Conclusion
The ECJ ruling of March 26, 2020 offers many borrowers an unexpected opportunity to free themselves from long-term financial obligations.
It is important that borrowers review their contracts carefully and seek expert help if necessary.
In particular, no “ill-thought-out” revocation should be declared and every borrower should be sufficiently informed beforehand about the legal consequences of a revocation.
This article does not represent specific and individual legal advice, but rather only provides a rough initial overview of the very complex legal matter described. You can only obtain legal certainty for your specific case constellation through coordinated examination and advice from an expert lawyer.
I would be happy to assist you as a lawyer and specialist lawyer for a legal assessment and assessment of your case and to accompany and support you with financial transactions or the assertion of liability claims and compensation for damages from financial transactions and investments as well as with banking law issues regarding loan collateral and loan agreements. Please feel free to contact me by phone or write to me.
I advise nationwide on site or via Zoom as a specialist lawyer in the legal areas of corporate law, tax law, insolvency law and banking and capital markets law, especially in the cities and metropolitan areas around Stuttgart, Heilbronn, Karlsruhe, Freiburg, Ulm, Augsburg, Munich, Frankfurt, Wiesbaden and Saarbrücken , Kaiserslautern, Bonn, Wuppertal, Duisburg, Nuremberg, Münster, Saarbrücken, Düsseldorf, Cologne, Dortmund, Hanover, Kassel, Leipzig, Dresden, Bremen, Hamburg and Berlin.
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