The bank does not have to pay negative interest to borrowers

The Association for Consumer Information rebuffs with complaint. The Austrian Supreme Court strengthens the position of the bank.

In February 2015, an Austrian bank sent a letter to its borrowers, in which – with respect to the “Libor” (London Interbank Offered Rate) bound with the interest escalation clause – it clarified the following: If the borrowing rate becomes negative, there will be no interest payments from the bank to the customers, but the borrowing rate will be frozen at zero percent.

The Association for Consumer Information found this unjust against the customers and wanted to clarify the situation in court. The bank was sued for omission pursuant to Article 28a of the Consumer Protection Act. The Association for Consumer Information saw the infringement of Article 28a of the Consumer Protection Act in the violation of the contract compliance obligation as well as in the violation of the adjustment symmetry associated with the freezing of the borrowing rate: Upwards, the adjustment of borrowing rates was open without restriction, while the bank limited the adjustment downwards to zero. This is a violation of Article 6 paragraph 1 clause 5 of the Consumer Protection Act.

The process was carried over to the Supreme Court through the Commercial Court of Vienna, which now took a final decision: the bank does not have to pay interest to its borrowers.

The first instance has proved the Association for Consumer Information to be right. The Supreme Court, on the other hand, sees no violation of the adjustment of symmetry. In the case of a credit agreement, the contracting parties agreed that the borrower, and not the lender, had to pay interest. At best, the borrower may rest assured knowing that it does not have to pay a borrowing rate.

Source: Supreme Court 

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