The Federal Court of Justice's 11th Senate (BGH, 20 July 2010, XI ZR 236/07) recently explained obiter dictum how banks can make direct debit payments (Zahlung per Einzugsermächtigungslastschrift) more insolvency proof. Following this judgement, banks may now want to change their general terms and conditions accordingly. Further, the 11th Senate ruled on conditions of implicit approval of debits in the direct debiting system by the debtor. The 9th Senate, responsible for insolvency law, supports the 11th Senate's view on both issues.
Direct debit payments are - as the name suggests - directly debited from the debtor's bank account following an instruction by the creditor to its bank to do so. According to the approval theory (Genehmigungstheorie) prevalent in Germany this is done by the debtor bank without prior authorisation of the debtor. Therefore, subsequent approval by the debtor/account holder is required to complete a direct debit payment. According to most banks' general terms and conditions in Germany, the debit is deemed approved if the account holder does not object within a certain time period (mostly six weeks).
In the past, the aforementioned approval theory gave rise to differences between the 11th and the 9th Senate of the Federal Court of Justice in insolvency situations, as the 9th Senate held that an insolvency administrator (and generally also a preliminary insolvency administrator) can generally object to all direct debits which had not yet been approved by the debtor, even though the debtor itself could have objected only subject to strict conditions. In consequence of the case law, such objections to direct debits by (preliminary) insolvency administrator became a useful means of enlarging the insolvency estate. However, pursuant to the rulings of the 11th Senate, insolvency administrators could become liable for damages to the creditor based on the law of tort when wrongfully objecting to a direct debit.
The 11th Senate now generally accepted the position of the 9th Senate, but also stated that banks could include general terms and conditions pursuant to which the account holder's authorisation towards the creditor to use the direct debit system is deemed to also act as authorisation for the debtor bank to debit the funds. That would make the subsequent approval by the debtor unnecessary; the insolvency administrator could no longer undo the transfers with his/her objection. As a safeguard for account holders against abuse of the direct debit system, the account holders could have a right to demand monies back pursuant to § 675x (2) German Civil Code. Interestingly, the court held that such right could not be exercised by an insolvency administrator.
In addition, the 11th Senate confirmed that until such changes are implemented by the banks, the account holder's approval may in certain cases be inferred from the lack of objection even prior to the expiry of the contractual objection period. In particular, in cases of recurring payments the approval may (depending on the individual circumstances) be assumed if the account holder is aware of the debiting, has approved previous payments of the recurring obligation in similar amounts and has not objected within a reasonable timeframe.
The 9th Senate declared its support for the legal opinion voiced by the 11th Senate regarding both issues. It is therefore expected that this new system will be accepted by both Senates and may indeed eliminate the problem of objections to direct debit payments by insolvency administrators in the long run.
Practice guide
- Until the banks change their general terms and conditions as outlined in the judgement, direct debit payments may still be objected by (preliminary) insolvency administrators. The safer payment alternative (from a creditor's perspective) is therefore the regular bank credit transfer (Überweisung) as this does not require subsequent approval and, once initiated, is not terminated by the opening of insolvency proceedings.