Landmark decision by the Federal Court of Justice (BGH) on interest adjustment in old bonus savings contracts
With two fundamental rulings (Case Nos.: XI ZR 44/23 and XI ZR 40/23), the Federal Court of Justice (BGH) on July 9, 2024, specified how subsequent interest calculation for long-term bonus savings contracts is to be carried out. The court thereby sets an important precedent for banking law in practice and clarifies that, in many cases, savings banks calculated interest too low when adjusting variable interest rates in old contracts, thus giving rise to additional payment claims by their customers. The resulting claims are of significant economic importance, particularly for consumers, but also for businesses and other investors.
Background: Bonus savings contracts and the dispute over interest adjustment
Development of contract design
Bonus savings contracts enjoyed great popularity among private and institutional investors, especially in the 1990s. These contracts are characterized by a comparatively low base interest rate, supplemented by increasing bonuses granted for regular deposits. At the same time, clauses often existed that granted the savings bank far-reaching rights to adjust variable interest rates.
Problematic interest adjustment clauses
Many contract documents provided that the credit institution could change the interest rate ‘taking into account current market developments’, while specific adjustment mechanisms or reference interest rates were regularly lacking. As a result, numerous institutions adjusted interest rates very cautiously over the years and often in a non-transparent manner. Consequently, many savers received significantly less interest than would have been expected with a market-based approach.
The BGH’s decision
Relevant reference interest rate
The BGH made it clear that savings banks must use the interest rate for time deposits with a three-month term as the reference rate for recalculation. The relevant figure is the moving average value of the respective reference rate over a period of three months, as published by the Deutsche Bundesbank.
Adjustment of interest conditions
In its rulings, the BGH emphasized that regular and appropriate adjustment of variable interest rates must take place, whereby the economic basis of the contract (the so-called contract purpose) must be taken into account. The court pointed out that interest rate developments may not be skewed unilaterally to the detriment of the customer. If banks and savings banks fail to fulfill this obligation to adjust interest rates in line with the market, the clarification now provided by the highest court can result in significant additional payment obligations.
Retroactive effect and limitation periods
The decisions of the BGH also make it clear that affected investors can insist on a recalculation of the interest received since the start of the contract, provided their claims have not already become time-barred. The possibility of limitation must always be examined on a case-by-case basis and depends, among other things, on the date of knowledge or grossly negligent ignorance of the claimant.
Implications for affected savings banks and savers
Obligations to make additional payments
By specifying the reference interest rate, the BGH concretizes the requirements for the so-called recalculation of interest. On this basis, consumer protection organizations as well as individual investors can now assert claims for additional payments, both in and out of court. The amount of possible additional payments depends largely on the particular circumstances and the individual contract history.
Significance beyond individual cases
The rulings are binding for comparable contract situations throughout Germany and are therefore of considerable practical relevance for a multitude of similar cases. Future bonus savings contracts and comparable investment products must be drafted and implemented in light of the highest court’s requirements. In addition, credit institutions will have to review their adjustment mechanisms and contract terms in light of the new legal situation.
Legal classification and outlook
Future disputes and unresolved issues
The BGH rulings are groundbreaking. Nevertheless, in individual cases there may still be judicial review of specific details—for example regarding limitation periods or the precise conversion of individual contract terms. Particularly companies, institutional investors, and high-net-worth individuals with larger commitments in bonus savings contracts may be subject to different legal frameworks due to individual contract designs.
Relevance for investors and institutions
The decisions create a higher degree of legal certainty for savers and regulate the conduct of credit institutions when dealing with interest rate adjustments. They also underscore the importance of transparent and comprehensible contract terms, both in existing customer portfolios and when issuing new savings products.
For questions regarding the implementation of Supreme Court requirements, the review of individual claims, or contract drafting in banking and capital markets law, the team at MTR Legal Rechtsanwalt is at your disposal.
