Sparkasse Loses Claim for Compensation After OLG Stuttgart Ruling
Due to insufficient clarification about the calculation of prepayment penalties for the early repayment of a loan, two borrowers are not required to pay a prepayment penalty and will receive their payment back from the Sparkasse. This was decided by the Higher Regional Court (OLG) of Stuttgart on February 7, 2024 (Case No.: 9 U 124/23).
When a loan is repaid early, the financial institution loses out on expected interest payments. To compensate for this loss, it can demand a prepayment penalty from the borrower. However, under § 502(2) of the German Civil Code (BGB), a bank or Sparkasse may lose its right to claim a prepayment penalty if it fails to adequately inform its customers about the duration of the loan agreement, the borrower’s right to terminate, and how the prepayment penalty is calculated, according to MTR Legal Rechtsanwälte, a law firm with extensive experience in banking law.
Prepayment Penalty Agreement
In the case before the OLG Stuttgart, the Sparkasse violated its obligation to provide proper clarification. The plaintiffs had entered into a loan agreement with the defendant Sparkasse in October 2016 for €263,000. The loan was intended to finance a property purchase. The parties agreed on an interest rate of 1.45% p.a., fixed until August 2036. The borrowers were granted the right to make annual special repayments of €13,150.
The loan agreement also stipulated that the Sparkasse could demand a reasonable prepayment penalty if the loan was repaid early during the fixed interest period. The penalty was to be calculated using the so-called active/passive method. According to the agreement, the Sparkasse would be placed in the same financial position as if the loan had been repaid as scheduled until the end of the fixed-interest term.
Early Repayment of Property Loan
When the borrowers sold the financed property in 2020, they also sought to repay their property loan early. They agreed with the Sparkasse to repay the remaining loan balance early in exchange for a prepayment penalty of approximately €12,500. Initially, the borrowers paid the penalty but later demanded its reimbursement, arguing that the Sparkasse had not adequately clarified how the penalty was calculated. They contended that the Sparkasse failed to differentiate between the end of the fixed interest period and the justified interest expectations. Furthermore, they argued that the repayment agreement violated § 512 BGB, as it constituted an impermissible circumvention transaction.
OLG Stuttgart: Borrowers Entitled to Refund
The OLG Stuttgart agreed with the borrowers’ arguments, ruling that they were entitled to a refund of the prepayment penalty.
The court explained that the penalty payment was based on the repayment agreement, which the plaintiffs argued was an impermissible and void transaction under § 512 BGB, designed to circumvent § 502(2) BGB. According to this regulation, the Sparkasse’s claim for a prepayment penalty was excluded due to insufficient contractual information about how the penalty was calculated.
The OLG Stuttgart noted that due to the property sale, the plaintiffs had a legitimate interest in repaying the loan early during the fixed-interest term, which was set to run until 2036. While the Sparkasse was entitled to claim a prepayment penalty, this claim was voided because the Sparkasse failed to present the penalty calculation with sufficient clarity and comprehensibility. This deficiency meant that the borrowers could not understand the calculation or reliably assess their financial obligations, the court found. As a result, the plaintiffs were entitled to a refund of the prepayment penalty.
Mistakes by banks and Sparkassen frequently lead to the loss of their claims for prepayment penalties. In particular, providing clear and adequate information about the penalty calculation often proves to be a sticking point. For borrowers, a review of the loan agreement can be worthwhile, especially since prepayment penalties for property loans often amount to five-figure sums.
MTR Legal Rechtsanwälte offers advice on prepayment penalties and other banking law topics.
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