A Luxembourg judgment for consumers

by Johannes Fiala, lawyer
Hundreds of thousands of investors in unprofitable investments have the chance to reclaim all  previous interest and principal payments. Many lending institutions have provided sales people with their  loan forms in recent years. These salesmen then sold the mortgage-backed loans (or fund shares) to the investors at home. A revocation instruction, as required by law, was not given to the consumers. In December 2001, the European Court of Justice (ECJ) ruled on this form of doorstep selling. To find out if you too can get your money back, read the post below:
Doorstep Deals with Real Estate Investors I. The ECJ decision The Doorstep Selling Act and an imminent decision by the European Court of Justice may result in losses for the credit industry and fund initiators. The European Court of Justice followed its Advocate General Philippe L�ger. This gives hundreds of thousands of investors the chance -to free themselves from their complete credit debts and -to reclaim all interest and redemption payments to date ! What is it about ? Many lending institutions have been providing sales people with their loan forms for the past 10+ years. The salesmen then sold the mortgage-backed loans (or fund shares) to the investors at home. A revocation instruction, as required by law, was not given to the consumers. The EU Directive on doorstep selling (Rili 87/577/EEC and 87/102/EEC) states that the customer who has been persuaded to conclude a contract in a “doorstep situation” must be informed of his right of withdrawal. The German legislator has stipulated in the Haustürwiderrufsgesetz that the right of withdrawal expires after one year. The BGH was not sure whether this implementation by the legislator was correct. The Advocate General at the European Court of Justice sees the matter in such a way that the instruction about the right of withdrawal is an indispensable obligation to succeed. Then the German legislator could not limit the right of withdrawal to one year, otherwise consumer protection would run dry. The defendant HypoVereinsbank submitted to the European Court of Justice that the application of the Doorstep Selling Act to real loans (i.e. loans secured by land charges or mortgages) ‘represents a considerable financial risk for credit institutions’. The HypoVereinsbank sees this quite correctly: Because with it then “damaged” investors, who financed their investment into a fund or a real estate by a mortgage loan, can leave it in the future to the bank whether these want to get themselves the money of the – unknown moved mediator – the insolvent initiator or developer, etc. again. In any case, the investor can get rid of his loan debt to his bank with the stroke of a pen: revocation under the Doorstep Selling Revocation Act is the magic word. With its decision, the European Court of Justice could help to rehabilitate hundreds of thousands of “over-indebted investors who feel they have been deceived”. Insofar as retroactive application to the credit industry is ruled out, the question of state liability arises: the state had already been sued in the area of travel law because European law had not been fully implemented in time in German law. The Advocate General at the European Court of Justice opposes HypoVereinsbank: It is not the type of transaction (real estate loan) that is at issue, but the manner in which the contract was concluded. This means that the “borrower taken by surprise by a doorstep situation and not informed of the right of withdrawal” may refuse to pay the bank at any time. The decision of the European Court of Justice from December 2001 fits well with the line of the BGH: By its recent decision (II ZR 304/00) it was clarified that in the case of an instalment purchase of fund shares in a doorstep situation the revocation period can still exist after 10 years if the investor had not been informed about the right of revocation and the investor still pays in instalments via a trustee to the investor.

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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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