10 December 2019
The Federal Court of Justice (Bundesgerichtshof (BGH)) ruled in 2014 and 2017 that clauses implementing arrangement fees (Bearbeitungsentgelte) in consumer and commercial loan agreements are subject to regulations governing standard terms and conditions (AGB-Inhaltskontrolle).
Arrangement fee clauses which are actually negotiated by the parties will fall within an exception to the regulations. If, however, the relevant provision falls within the ambit of the regulations and fails to comply, a court could deem it ineffective. In these circumstances, any fees paid would have to be reimbursed.
In commercial loan agreements, both the lender and the borrower usually prefer having a one-off arrangement fee, rather than a higher interest rate running throughout the duration of the loan. The lender gets its money upfront, irrespective of early termination of the loan agreement and/or prepayment, and the borrower can often reduce its tax burden.
Unfortunately, the legislation and judicial interpretation presently work together to lead to the bizarre situation that even when both lender and borrower have agreed on an arrangement fee, they may be thwarted by the decision of a German court.
Borrowers and lenders have therefore tried to find new solutions to factor in arrangement fees for payment on signing, despite the BGH's ruling:
While market participants are currently using methods to include arrangement fees for loans, these have not yet been tried and tested by the German courts.
With different jurisdictions taking different paths in terms of regulatory classification of NFTs, the question can be raised: where the EU is currently standing, and more importantly, where it is heading when it comes to this topic?
by multiple authors