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Gleiss Lutz Hootz Hirsch

German banks should be preparing for a new bill on bank transfers which has been rushed through the German Parliament so it can be in effect on August 14 1999 — the deadline for implementation of the EU Directive upon which it is based. The new bill is to transpose Directive 97/5/EG of January 27 1997 concerning cross-border transfers into German law. The new law seeks to give more rights to consumers vis-à-vis financial institutions. Particularly, it aims to curtail transfer delays and the imposition of arbitrary charges by financial institutions.

The new law stipulates that:

  • a financial institution must inform a transferor of the duration, charges and expenses of a transfer;
  • a domestic transfer and a cross-border transfer should be completed within three banking days and five banking days respectively, and a transfer within the head office or a branch of a financial institution must be completed within one banking day. The beneficiary's financial institution must credit the amount to the beneficiary's account at the latest on the banking day following the day of receipt. Interest is payable in the case of any delay unless it was caused by the transferor or the beneficiary;
  • the whole amount as instructed by the transferor must be transferred;
  • where a transfer has failed, the financial institution must credit the same amount to the transferor's account (money back guarantee) free of charge; and
  • disputes must be resolved through out-of-court proceedings. Encompassing domestic transfers, the new law's scope is broader than that of the Directive which applies to cross-border transfers. The new law will be incorporated into the German Civil Code and is expected to be in force by August 14 1999.

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