Processing Fee for Business LoansBank Must Refund Processing Fee After Berlin Court Ruling

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An Immobiliengesellschaft (real estate company) paid around €39,000 in processing fees to a bank for taking out a loan. According to a decision by the Berlin Court of Appeal (Kammergericht Berlin) on October 30, 2023, the bank must refund the processing fee because the payment of these fees was not effectively agreed upon (Case No. 8 U 212/21).

According to the Federal Court of Justice (Bundesgerichtshof, BGH) ruling from July 4, 2017, provisions in general terms and conditions (AGB) regarding processing fees for business loans are invalid. The BGH jurisprudence holds that the fairness of such clauses cannot be justified by the peculiarities of commercial transactions or the potentially better understanding of a businessman regarding the resulting overall financial burden, stated the law firm MTR Legal Rechtsanwälte, which advises, among other things, on banking law.

Processing Fee Amounting to 1 Percent of the Loan Sum

The Berlin Court of Appeal based its decision on this jurisprudence. In the underlying case, a real estate company took out a loan from the defendant bank. The parties agreed on a processing fee amounting to 1 percent of the loan sum—around €39,000. The borrower initially paid the fee but later demanded its return, arguing that the agreement was invalid.

As expected, the bank saw it differently and refused the repayment, arguing that the processing fee was not part of the standard terms but was individually negotiated with the borrower after extensive discussions. The agreement was fixed on an information sheet and was not part of the AGB. Furthermore, the bank argued that a repayment according to § 814 BGB was excluded because the borrower, as a fully qualified merchant and business agent, had comprehensive knowledge of the real estate market and financing options, thus should have known about the BGH jurisprudence regarding processing fees for business loans.

Berlin Court of Appeal Dismisses Appeal

The bank did not succeed with this argument at the Berlin Regional Court. The court ordered the bank to repay the processing fee in the first instance. The bank was also unsuccessful at the Berlin Court of Appeal, which dismissed the appeal and confirmed the first-instance judgment.

The Berlin Court of Appeal explained that the loan agreement contained an invalid AGB clause regarding a processing fee of 1 percent of the loan sum. While the clause was not directly in the AGB, where it would have been easily recognized as invalid, the bank could not circumvent the rule on the invalidity of a processing fee by merely indirectly addressing it in the loan agreement, specifying the fee only in the attached ESIS information sheet, and requiring the borrower to sign an individual agreement as a prerequisite for loan disbursement. The court emphasized that by signing, the borrower confirmed that the contract components, particularly regarding interest and processing fees, were freely negotiated and became part of the loan agreement as individual terms.

Concealed Standard Terms

This still constitutes an AGB, even if a clear regulation directly in the loan agreement was avoided. The bank’s pre-formulated declaration that the contract components, particularly the processing fee, were freely negotiated individual agreements, listed as a disbursement prerequisite in the loan form, was meaningless, the court continued. It confirmed that the purportedly freely negotiated individual agreement was indeed an AGB. A genuine free negotiation only exists if the bank shows a serious willingness to negotiate the disputed clause, which was not evident. Thus, the clause was invalid.

The refund of the processing fee was also not excluded under § 814 BGB. It is insufficient for the borrower to know the BGH jurisprudence on processing fees; they must also draw the correct legal conclusion of the absence of a legal obligation. Due to the bank’s contract design, especially the required confirmation of an individual agreement, the presence of an AGB was concealed, so even an experienced businessman could believe he was obliged to pay the processing fee. Therefore, the bank must refund the processing fees, ruled the Berlin Court of Appeal.

MTR Legal Rechtsanwälte advises on banking law and corporate finance issues.