Draft bill for the implementation of the Consumer Credit Directive 2023 published

Since November 2023, the fully harmonising Consumer Credit Directive (EU) 2023/2225 (CCD II) has been in force, addressing in particular recent developments in online consumer credit business. On 23 June 2025, approximately five months before the deadline for implementing the directive, the German Federal Ministry of Justice and Consumer Protection (Bundesministerium der Justiz und für Verbraucherschutz) published the draft bill for the implementation act together with an accompanying synopsis. In addition to changes to supervisory law (see Insights), the draft bill provides for significant changes to the law on general consumer loan agreements.

Scope of application significantly expanded

The scope of application of the provisions applicable to general consumer credit agreements (section 491(2) of the German Civil Code (Bürgerliches Gesetzbuch ‒ BGB) is to be significantly extended:

• Interest-free credit agreements: The concept of a general consumer credit agreement will no longer require the loan to be for consideration so that interest-free loans in particular will be covered (section 491(2), sentence 1 of the German Civil Code ‒ Draft Bill (Bürgerliches Gesetzbuch ‒ Referentenentwurf ‒ BGB-RefE) (the “Draft Bill”). The same is to apply to payment deferrals and other financing aids (section 506(1), sentence 1 of the Draft Bill).
• Small-sum loans: Loans with a total amount of less than €200.00 will also fall within the scope of consumer credit law. Again, the same applies to payment deferrals and other financing aids.
• Short-term loans: The Draft Bill provides for the deletion of section 491(2), sentence 2, no. 3 of the German Civil Code. As a result, agreements which must be repaid within three months and involve only minimal costs would in future also be considered general consumer credit agreements. The consumer protection provisions are also to apply to short-term payment deferrals and other short-term financing aids.
• “Buy now, pay later” schemes: By including interest-free credit agreements, small-sum loans, short-term loans and the corresponding payment deferrals, what are known as “buy now, pay later” schemes will in future also be subject to the provisions for general consumer credit agreements. These schemes “whereby the creditor grants credit to a consumer for the exclusive purpose of purchasing goods or services provided by a supplier, which are new digital financial tools that let consumers make purchases and pay them off over time, are often granted free of interest and without any other charges.” (Recital 16 CCD II).
• “Classic” purchase on account: Purchases on account, where the supplier of goods or services itself grants an interest-free payment deferral, are to be partially excluded from the scope of the rules for general consumer credit agreements. Purchases on account are not covered by the relevant rules if (i) they are offered by micro, small or medium-sized enterprises, (ii) the interest-free payment deferral does not exceed 50 days and (iii) the consumer will only incur limited charges for late payment. A further requirement is that no third party has provided a credit agreement, payment deferral or other financing aid (section 506(1), sentence 2, no. 4 and sentence 3 of the Draft Bill). In future, distance contracts with large enterprises are excluded from the scope of application if the interest-free payment deferral does not exceed 14 days and the consumer will only incur limited charges for late payment, without a third party offering credit, deferral of payment or other financial assistance or acquiring the right to payment (section 506(1), sentence 3 of the Draft Bill).
• Debit cards: The Draft Bill does not make use of the option to exempt deferred debit cards (“charge cards”) from the scope of application of the general consumer credit agreement rules under certain conditions. This represents a tightening compared to previous law.

Written or electronic form (“Textform”) sufficient for contract conclusion

For general consumer credit agreements, the draft abolishes the requirement for written form in favour of what is known as “Textform” in German law, i.e. written or electronic form (section 492(1), sentence 1 of the Draft Bill). This is intended to reduce bureaucracy and promote digitalisation. However, this change, which is not required by the Consumer Credit Directive 2023, does not apply to consumer credit agreements for immovable property.

Maximum period for withdrawal and abolition of legal fiction

The Draft Bill implements Article 26(2) of the Consumer Credit Directive 2023 and introduces a maximum period of twelve months and 14 days from contract conclusion for exercising the right of withdrawal (section 356b (2), sentence 5 of the Draft Bill). However, the consumer must have been properly informed about the right of withdrawal, including the withdrawal period, the form of the withdrawal notice and the obligation to repay the drawn credit plus value compensation (see Article 247, section 6(2) of the Introductory Act to the German Civil Code – Draft Bill (Einführungsgesetz zum Bürgerlichen Gesetzbuch – EGBGB-RefE)).

The legal fiction so far provided for in Article 247, section 6(2), sentence 3 of the Introductory Act to the German Civil Code is to be abolished without replacement (though the legal fiction for consumer credit agreements for immovable property will, however, remain). The Draft Bill justifies this removal by noting that the CCD II does not provide for standardised information templates, and potential errors in statutory templates might only emerge years later ‒ potentially after a ruling by the Court of Justice of the European Union (Draft Bill, p. 150). This is both notable and regrettable as it concedes that it is almost impossible to ensure that every consumer receives information that is fully compliant with all legal requirements.

Stricter rules for overdraft facilities

For agreements on permitted overdrafts (section 504 of the Draft Bill), there will in future be a right of withdrawal (section 495(1) of the German Civil Code). For tolerated overdrafts, in line with the exemption under Article 2(4) of the Consumer Credit Directive 2023, there will continue to be no right of withdrawal (section 495(2), no. 3 of the Draft Bill).

In addition, there will be information obligations in the event of termination (or partial termination) of the overdraft facility. At least 30 days before the termination or reduction of the overdraft facility takes effect, the consumer must be informed about the termination or reduction that will result from the notice of termination (section 504 (2), sentence 1 and section 505(5) of the Draft Bill).

Furthermore, before initiating enforcement proceedings following termination, the creditor must allow the consumer to repay a utilised and terminated overdraft facility or a tolerated overdraft in twelve monthly instalments at the agreed interest rate.

Creditworthiness assessment tightened

Requirements for creditworthiness assessments in general consumer credit agreements are to be tightened overall. In future, the creditworthiness assessment must demonstrate that proper contract fulfilment by the borrower is probable (section 505a ( 1), sentence 2 of the Draft Bill). The assessment must be based on relevant and accurate information regarding the borrower’s income, expenses and other financial and economic circumstances (section 505b (2), sentence 1 of the Draft Bill). Particularly sensitive data, such as political opinions and health data, may not be included (section 505b (2), sentence 2 of the Draft Bill). Querying the required information in a database is permitted; social networks are excluded as sources of information (section 505b (3) sentence 1 of the Draft Bill). The documentation obligation that so far only applies to consumer credit agreements for immovable property is to be extended to consumer credit agreements (section 505b (4) of the Draft Bill). This means that affected companies will be faced with significantly more bureaucracy.

Under section 30(6), sentence 1 and sentence 2 of the Draft Bill borrowers in general consumer credit agreements will have the right to a human decision instead of purely automated data processing in creditworthiness assessments. This includes the right to request a review of the creditworthiness assessment and the credit-granting decision by a human if the assessment involved automated processing of personal data.

Invalidity due to objectively excessive annual percentage rate of charge (APR)

Section 492(9) of the Draft Bill adopts the legal principles derived from section 138 of the German Civil Code concerning the offending of common decency of general consumer credit agreements, without requiring subjective conditions (Draft Bill, pp. 107 ff.). Specifically, it provides that a consumer credit agreement is void if there is a conspicuous disproportion between the contractual APR and the market-standard APR for comparable loans at the time the interest rate was agreed. Such a disproportion is “generally” deemed to occur if the contractual APR exceeds the market-standard APR at the time the contract was concluded by 100 per cent or by twelve percentage points. It is also provided that any security transactions concluded to collateralise the void contract are also void (section 492(9), sentence 3 of the Draft Bill).

Outlook

The federal states, associations and interested parties have until 18 July 2025 to comment on the Draft Bill. The Bundestag will not consider the draft and the foreseeable criticism of it until after the end of the parliamentary summer recess in September. The Act must enter into force by 20 November 2025 in order to comply with the Consumer Credit Directive 2023’s implementation deadline. The new rules must then be applied from 20 November 2026 at the latest.