In a significant turn in Austrian jurisprudence, the Austrian Supreme Court handed down a landmark decision on February 19, 2025 (file number 7 Ob 169/24i) (2024 Ruling), revising its long-standing position on loan processing fees previously upheld since its judgement in 2016 (Austrian Supreme Court 30.03.2016, 6 Ob 13/16d).
The Austrian Supreme Court held that the loan processing fees stipulated in standard terms and conditions (Allgemeine Geschäftsbedingungen – T&Cs) and calculated as a percentage of the loan amount, are grossly disadvantageous to consumers and therefore inadmissible, making a clear departure from its earlier approach of declaring such contractual provisions in transparent and therefore void. While this outcome may not be entirely unexpected given the recent case law of the European Court of Justice (ECJ), its practical implications are far-reaching. It is clear the decision leaves some questions unanswered, which require further judicial clarification.
Initial legal framework
Under Austrian consumer protection laws, predominantly based on EU consumer protection legislation, the lawfulness of T&Cs has to be assessed in a three-step review process: validity review (Geltungskontrolle), transparency review (Transparenzgebot), and content review (Inhaltskontrolle). The latter applies exclusively to ancillary obligations but not principal obligations.
In its 2016 ruling, the Austrian Supreme Court ruled that loan processing fees are part of the principal obligations, essentially being part of the consideration of the loan itself. As such, they were exempt from content review all together under Section 879 para 3 Austrian Civil Code, and courts refrained from assessing their substantive fairness.
The Court’s new view
In the 2024 Ruling, the Austrian Supreme Court reassessed its own reasoning in light of the Caixabank judgments (C-224/19, C-259/19 and C-565/21) handed down by the ECJ. In these rulings, the ECJ held that loan processing fees constitute an ancillary rather than a principal obligation. According to the ECJ, the lender’s primary duty is to provide the agreed sum, while the borrower must repay it with interest. Processing fees thus fall outside the principal obligations.
Following this shift in interpretation of EU law, the Austrian Supreme Court began to revise its position. In a series of rulings known as the “fitness studio decisions” (2022–2023), the Austrian Supreme Court laid the groundwork for a new understanding. Specifically, it steadily expanded its new interpretation ruling that processing fees constitute ancillary contractual obligations and are therefore subject to content review under Section 879 para 3 Austrian Civil Code.
Apart from fitness centre contracts, businesses in other sectors, such as telecommunication contracts, ticket sale contracts (eg CTS Eventim), food delivery contracts, and event organisers in connection with charged waste disposal fees are now under increased scrutiny for using similar fee structures.
A further clarification by the Austrian Supreme Court regarding loan processing fees after the “fitness studio decisions” had been widely anticipated. However, the subsequent decision with file number 2 Ob 238/23y, dated January 23, 2024, did not clarify the legal situation. As previously mentioned, since 2016, the Austrian Supreme Court declared loan processing fees void based on the transparency review. Therefore, no substantive examination was carried out under the content review according to Section 879 para 3 Austrian Civil Code.
The long-awaited clarification finally came with decision 7 Ob 169/24i, in which the Austrian Supreme Court examined the clause under Section 879 para 3 Austrian Civil Code and concluded that percentage-based processing fees without any upper cap unfairly disadvantage consumers and are therefore invalid.
The Austrian Supreme Court reasoned that the services covered by the processing fee, such as consultations, risk assessments, and offer preparation, are standard services typically incurred during the contract initiation. These services average approximately 19 hours for mortgage loans and under three hours for consumer loans. A flat fee of 1.5 % of the loan amount (with no upper limit), based solely on the amount of the loan, constitutes disproportionate costs. As an example, the Austrian Supreme Court states that for a mortgage of EUR220 thousand, the processing fee amounts to EUR3,3 thousand; for EUR440 thousand, it doubles to EUR6,6 thousand, despite no demonstrable increase in workload. According to the Austrian Supreme Court, the appellant failed to establish any “additional complexity” or “greater liability risk” associated with higher loan amounts. In particular, the comparison with the Lawyers’ Fees Act (Rechtsanwaltstarifgesetz) or the Court Fees Act (Gerichtsgebührengesetz) is inadmissible, as these are statutory fee schedules, and the Lawyers’ Fee Act is structured on a diminishing sliding scale.
Importantly, the Austrian Supreme Court did not question the legitimacy of loan processing fees per se. Rather, it criticised their specific design when they grossly exceed the actual costs. Fixed-sum or flat-rate fees appear to remain permissible, provided a reasonable relation between factual effort and fees can be established.
Equally, the Supreme Court examined clauses relating to certain fees, such as charges for reminders, contract amendments, and account maintenance fees, and found them to be inadmissible where no specific and adequate service is rendered in return.
This decision could have sweeping consequences, potentially triggering mass refund claims. Initial class actions have already been launched, led by consumer advocacy groups such as the Association for Consumer Information (Verein für Konsumenteninformation) and the Austrian Chamber of Labour (Arbeiterkammer). The Consumer Protection Association (Verbraucherschutzverein) is likewise promoting a type of Austrian class action concerning the refund of loan processing fees and has opened registration for consumers wishing to reclaim unlawfully charged fees. In addition, litigation funders and claimant-focused law firms are now actively soliciting clients in light of the recent rulings, which now explicitly cover loan processing fees. This constitutes a strong indication that a wave of litigation is likely to follow.
Impact on banking practice and the grey area ahead
The Austrian Supreme Court further underscored that its ruling is not limited in temporal scope, meaning it also applies to previously concluded contracts. For banks, this could become very costly. The issue of limitation period is particularly relevant here: under current Austrian law, consumer claims for the reimbursement of unlawfully charged fees are subject to an objective limitation period of 30 years. In contrast, where claims are brought by businesses, it may be argued that a shorter three-year limitation period pursuant to Section 1486 no 1 Austrian Civil Code applies.
Importantly, Section 879 para 3 Austrian Civil Code, unlike EU consumer protection law, is not limited to consumer contracts. As a result, the Austrian Supreme Court’s reasoning may also have implications for business-to-business relationships.
According to the Austrian Supreme Court’s reasoning, the higher the loan amount, the greater the processing fee in absolute terms, and the higher the likelihood of a disproportionate charge. Ironically, the implementation of this implicit proportionality test could end up “benefiting” borrowers of large loans, as smaller loans tend to carry proportionally smaller fees, which might still be acceptable. This raises a pivotal question: At what point does a processing fee become disproportionate?
This question will probably need to be further refined in upcoming rulings.
By Dominik Schwarzl and Armin Redl, Senior Associates, DLA Piper