Germany: Corona crisis special features of lending law from the banks’ perspective

On the occasion of the drastic restrictions imposed by the corona virus, the German government today passed the law to mitigate the consequences of the COVID-19 pandemic in civil, insolvency and criminal proceedings, which is to be passed by the Bundestag this week.

Changes by law

In addition to other temporary special provisions, the Act also contains a provision on a deferral of payment of at least three months for consumer loan agreements. Customers who are consumers and have concluded a consumer loan agreement with you before 15 March 2020 may suspend interest or repayment of principal amounts due between 1 April 2020 and 30 June 2020 for a period of three months. This is subject to the condition that the borrower suffers a loss of income due to the Corona crisis, which means that ‘it is unreasonable to expect the borrower to perform its payments. After this three-month period has expired, the payment obligation resumes. The deferral of the repayment obligation thus leads to a postponement of the contractual end of the loan term.

What do you need to do?

We recommend that you carefully examine the reasons given by customers to justify a suspension of repayment. In addition, you should set out in writing the agreement with the customer on the deferral of payment and document it in a comprehensible manner, including the customer’s evidence provided.

To whom do these provisions apply?

So far, the above provision only applies to consumer loan agreements. The law also provides for the possibility of extending the regulations to micro enterprises (up to ten employees and annual turnover or annual balance sheet total of less than EUR 2 million each) in the short term. We will keep you informed of current developments in this regard and will be happy to assist you with individual questions.

No termination of loan agreements without compensation

Some resourceful borrowers in the area of real estate loans have already announced that they will extraordinarily terminate their interest-linked loans with reference to the Corona crisis and that they do not intend to pay an early repayment fee for this.
We would be pleased to support you in enforcing your claims against such customers that are not justified.