Banks must refund entry and exit fees, and with default interest the amount today far exceeds the fee itself
Most people who once had a Swiss franc loan assume the matter was closed long ago. The loan has been repaid, refinanced or converted into euros, and the agreement went into a drawer. Yet that agreement almost always contains an item that is talked about least of all.
We mean the loan processing fee paid at the outset and the early repayment fee paid if the loan was closed ahead of schedule. The courts, up to and including the Supreme Court and the Constitutional Court, hold such terms void. The bank must return the money, together with default interest running from the day you paid the fee.
For agreements from 2005, 2006 or 2007 that interest today comes to several times the fee itself. And Swiss franc agreements carry an argument an ordinary kuna or euro loan does not.
Which fees are at issue
The entry fee was charged once, on disbursement, as a percentage of the approved amount – most often between 0.8% and 2%. In the agreement it is called a “loan application processing fee”, a “processing and approval fee” or simply “processing costs”. On a loan equivalent to EUR 100,000 that is EUR 800 to EUR 2,000.
The exit fee was charged on early repayment. Very often its amount was not even written into the agreement, which instead referred to a “tariff” or to “the bank’s acts in force on the day of early repayment”.
Neither should be confused with actual costs – the property valuation, notarial fees or an insurance policy. Those were paid to third parties and are not what is reclaimed.
Why a Swiss franc agreement is the stronger case
When a court assesses whether a fee term is unfair, it does not look at it in isolation. The law requires it to take into account the other terms of the same agreement. That is exactly where Swiss franc agreements stand out.
In those agreements two other terms have already been held void, finally and in collective proceedings: the term on the variable interest rate which the bank altered by unilateral decision, and the term on the Swiss franc currency clause, whose consequences were never explained to consumers even though the banks were aware of the risk.
Where the same agreement contains two terms already held unfair, the conclusion that the bank did not act in good faith need not be proved – it has already been established. Against that background a fee term, assessed in the same context, rarely survives.
What the bank has to prove
It is a common misconception that it suffices to say the fee was not negotiated. The Supreme Court has expressly held that the assessment of unfairness cannot rest on that alone – the court must apply the full test. But the burden of proof lies with the bank, on three points:
- that the fee was individually negotiated. With a standard-form agreement the law presumes it was not. Banks regularly fail to prove otherwise – not infrequently it is their own employee’s testimony that confirms the terms were fixed by a decision of the bank.
- that the consumer could assess what he was paying for. It is not enough that the percentage is legibly stated; the relationship between what is paid and what is received must be intelligible to the consumer.
- that the fee corresponds to real costs. Where it is set as a percentage of the loan, that is difficult – the cost of processing one application does not rise with whether the client asks for EUR 30,000 or EUR 150,000.
An unfair contract term is void, and the consequence of nullity is the return of what was paid under it.
The exit fee: a prohibition stronger than the contract
Here the argument is more direct still. The Civil Obligations Act contains a mandatory rule: a loan may be repaid before the due date, and the bank is expressly prohibited from charging interest for the period between repayment and maturity. The bank is entitled only to loss it actually suffered.
What loss does a bank suffer by receiving its money earlier? Lost future interest is not it – the law excludes it. What remains are the real administrative costs of closing the loan, and the bank must prove them in amount; a reference to its own tariff is not proof. Where it fails to do so, the fee is nothing other than the recovery of interest it would have earned had the loan run its full term – precisely what is prohibited.
In addition: where the agreement leaves the amount to “the bank’s acts in force on the day of repayment”, the borrower cannot know at signature what he will pay. The bank sets the amount itself, which is on its own sufficient for nullity.
The same applies to businesses, only on a different footing: the nullity of general-terms clauses and the general principles of the law of obligations. The bank penalises a client for having performed his obligation properly and ahead of time, which runs counter to the purpose of the contract itself.
Why the interest exceeds the fee itself
Where what was acquired without legal basis is returned, default interest runs from the day of acquisition if the recipient acted in bad faith. The courts treat a bank that imposed a void term on a consumer with no possibility of negotiation in exactly that way. The consequence: interest runs from the day the fee was paid, not from the day you asked for it back.
On top of that, statutory default interest was in double digits until 2015 – 15%, then 14%, then 12% per annum.
By way of illustration: a fee of EUR 1,000 paid in mid-2005 has by today accrued roughly EUR 2,100 in interest, or about EUR 3,100 in total. Where the fee ran to two or three thousand euros, the total claim today is measured in several thousand, and the bank bears the costs of the proceedings on top.
Neither the age of the agreement nor a repaid loan is an obstacle
The bank will plead limitation: the fee was paid in 2006, the period is five years, the claim has lapsed. The courts reject this – the right to invoke nullity is not subject to limitation, and the five-year period for recovery begins to run only once the judgment establishing nullity becomes final. The limitation period for your claim, therefore, has not even started to run.
The other defence is that nullity can no longer be invoked because the loan is repaid and the relationship closed. That does not hold either: the restriction the banks rely on applies only to breaches of lesser significance, whereas here, given the number of agreements concluded, the public interest is also protected.
What to do
- Find the loan agreement, any annexes and the general terms, together with proof that the fee was paid – a statement, a bank confirmation or a repayment schedule.
- If you no longer have the documents, request them from the bank in writing and keep the receipt. The bank is obliged to issue a copy of the agreement and of the transactions on the loan.
- Check how the fee is described. A percentage with no concrete cost behind it, or a reference to a “tariff” and “the bank’s acts”, is precisely what the courts base a finding of nullity on.
- Send the bank a written request for a refund of the fee with default interest from the day of payment. If the bank refuses or does not reply, a claim remains.
The outcome always depends on the wording of the particular agreement, so it is advisable to have a lawyer review it before filing a request. It is also worth checking old loans of other family members – the right belongs to the person who paid the fee.
If you had, or are still repaying, a loan in Swiss francs, our office can review your agreement, calculate the entry and exit fees together with default interest, prepare the request to the bank and the statement of claim, and represent you in the proceedings.