Interest escalation clause: The premium (“Margin”) is not retained by the bank

A limitation of the reduction of the indicator with zero so that the consumer has to pay in any case the agreed premium as interest, violated the article 6 paragraph 2 clause 5 of the Consumer Protection Act.

Recently, the Austrian Supreme Court (OGH) had a lot to do with regard to decisions on borrowing rates. The question of whether banks need to make interest payments to credit customers when the borrowing rate is negative, has already been answered in the negative. In the case of a credit agreement, the contracting parties agreed that the borrower, and not the lender, had to pay interest.

There is also the question of whether banks should always be able to require the premium, a first judgement. Article 6 paragraph 1 clause 5 of the Consumer Protection Act (KSchG) precludes an interpretation of the interest escalation clause to the effect that the indicator is unilaterally set to zero. Thus, only a lower limit is set, while an upper limit is missing. According to the purpose of article 6 paragraph 1 clause 5 of the Consumer Protection Act, in the case of interest escalation clauses, a remuneration must be paid to the same extent and at the same temporal implementation as an increase in remuneration in order to ensure consumer protection. 

The remuneration, which the bank retains for the transfer of the capital, consists of the total agreed interest, the agreed premium. A one-sided limitation of the downward sliding interest rates, which would give the defendant an interest payment equal to the agreed mark-up, without a simultaneous upper limit, is therefore not permissible.

Source: Supreme Court 

More information:

How do borrowers profit from negative interest?

The bank does not have to pay negative interest to borrowers