The Supreme Court: banks can no longer terminate contracts concluded with consumers without good reason

Banks have limited options for unilaterally terminating payment service contracts concluded with consumers. According to the latest decision of the Supreme Court, it is now very clear in which circumstances a credit institution can unilaterally terminate a payment service contract with a consumer.

In the disputed case, a client had concluded a payment service agreement with the bank for the use of a bank account and a payment card. The bank unilaterally terminated the contract, citing the consumer’s association with dubious companies as the reason. The client appealed to the court against the bank; the dispute finally reached the Supreme Court, which just reached its decision.

The law of the European Union came to the rescue

The Supreme Court noted that the bank is obliged by law to enter into a payment service contract with a person who expresses their intent in this. This obligation would not fulfil its purpose if, after concluding the contract, the bank could terminate it without good reason since it would nevertheless be obliged to conclude a new contract at the client’s request. The court interpreted the law of the European Union created to protect consumers and considered on which basis the bank can unilaterally terminate the contract with a consumer.

The contract can only be terminated based on a good reason

The court reasoned that the bank could only terminate a contract for basic payment services concluded with the consumer for a good reason, having limited grounds for doing so. In particular, if the consumer has committed such acts as fraud, money laundering, or terrorist financing, these are valid reasons and permissible grounds for terminating the contract. The bank must clearly justify the termination and indicate all the circumstances on the basis of which it has established that the consumer has committed such an act; suspicion alone is not enough to terminate the contract.

More assurance for consumers

If the bank terminates the basic payment service contract concluded with the consumer on insignificant grounds, then the termination of the contract is null and void, and the consumer may have claims against the bank.

As an exception, the bank may widen its grounds for terminating contracts concluded with entrepreneurs, as the European Union’s consumer protection rules do not apply to entrepreneurs.

The new court ruling should give consumers confidence that banks will not terminate contracts with them without reason and without the consumer having done anything wrong.

However, if you come across cases where banks are not following the Supreme Court’s instructions, feel free to contact us.

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