Rulings of the Federal Court of Justice on Custody Fees – Case Numbers: XI ZR 61/23, XI ZR 65/23, XI ZR 161/23, and XI ZR 183/23
During the prolonged low-interest phase, a number of banks began charging their customers so-called custody fees, effectively imposing negative interest rates on deposits. Such custody fees on savings deposits and instant access accounts are impermissible, as ruled by the Federal Court of Justice (BGH) on February 4, 2025 (Case Nos.: XI ZR 61/23, XI ZR 65/23, XI ZR 161/23, and XI ZR 183/23). Moreover, negative interest rates may also be unlawful for checking accounts if the bank has not formulated the relevant clauses clearly and unambiguously for customers.
For an extended period, interest rates remained at historically low levels. In 2014, the European Central Bank (ECB) began imposing negative interest rates on deposits. Various banks and savings banks ultimately passed these additional costs on to their customers in the form of custody fees on account balances. This affected not only savings and instant access accounts but also checking accounts. The legality of banks imposing negative interest rates was a matter of dispute. The Federal Court of Justice has now positioned itself clearly in favor of bank customers, strengthening their rights. The court ruled that custody fees on instant access accounts and savings deposits are unlawful and that they may also be impermissible for checking accounts. Affected bank customers can now reclaim any negative interest fees charged by their banks, according to the law firm MTR Legal Rechtsanwälte, which advises on banking law, among other areas.
Negative Interest Rates on Savings and Instant Access Accounts Unlawful
The BGH ruled on lawsuits filed by the Federation of German Consumer Organizations and the consumer protection agencies of Saxony and Hamburg. These organizations deemed the custody fees charged by various financial institutions to be unlawful. Their claims were largely successful.
The BGH made it clear that custody fees on instant access accounts and savings deposits constitute an unreasonable disadvantage for customers. Deposits in these accounts serve not only as secure storage for funds but also for investment and savings purposes. The imposition of negative interest rates fundamentally alters this character to the detriment of customers, contrary to the principles of good faith, the Karlsruhe judges stated.
Unreasonable Disadvantage to Bank Customers
A negative interest rate on an instant access account eliminates its purpose as a savings and investment tool if the custody fee exceeds the account’s interest earnings. Ultimately, this results in a reduction of the deposited amount, the BGH explained. For savings deposits, the purpose is to build wealth over the medium and long term and to protect it against inflation through earned interest. This objective is undermined by custody fees, as they lead to a reduction in the savings balance. The court ruled that this constitutes an unreasonable disadvantage for consumers, which cannot be justified by the fact that financial institutions may have had to pay negative interest on their own deposits at the central bank between June 2014 and July 2022.
Custody Fees May Also Be Unlawful for Checking Accounts
The situation is more nuanced for checking accounts. Here, the imposition of custody fees may, in principle, be permissible. However, contractual clauses regarding custody fees in checking accounts are impermissible if they violate the transparency requirement under § 307 (1) sentence 2 of the German Civil Code (BGB), according to the judges in Karlsruhe.
These clauses must inform customers about the amount of the custody fee in a way that allows them to understand their financial burden. Since account balances in checking accounts can fluctuate multiple times a day due to incoming and outgoing transactions, account holders must be clearly informed about which specific balance is used for calculating the custody fee and until what time daily transactions are considered. If these requirements are not met, negative interest rates on checking accounts are also unlawful.
Reclaiming Negative Interest Fees
Following the BGH rulings, affected bank customers have good prospects of reclaiming any negative interest fees paid to their bank. However, they should be mindful of the statute of limitations on their claims. Due to the three-year limitation period, custody fees from 2022 can still be reclaimed. For older claims, the issue of limitation has not yet been conclusively settled. However, it is likely that older custody fees can also be reclaimed, as the legal situation has only now been definitively clarified by the BGH.
MTR Legal Rechtsanwälte provides legal advice on reclaiming negative interest fees and other banking law matters.
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