Interest Adjustment Act

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Basic data
Title: Law on the adjustment of loan agreements to market conditions and on compensation payments to borrowers
Short title: Interest Adjustment Act
Abbreviation: KredAAG, ZinsAnpG
Type: Federal law
Scope: Federal Republic of Germany
Legal matter: Right of agreement
References : 105-8
Issued on: June 24, 1991 ( BGBl. I p. 1314 )
Entry into force on: July 1, 1991
Last change by: Art. 23 G of December 18, 1995
( Federal Law Gazette I, p. 1959, 1966 )
Effective date of the
last change: 		January 1, 1996
(Art. 30 para. 1 G of
December 18, 1995)
Please note the note on the applicable legal version.

The so-called interest rate adjustment law , just "law on the adjustment of credit agreements on market conditions and on compensation to borrowers" (KredAAG), which entered into force on 1 July 1991, was to determine credit agreements the GDR which have been granted until 30 June 1990 were granted - and which were often granted as interest-free or strongly reduced- interest loans - to adapt to the “prevailing market conditions”.

The law granted all GDR borrowers an extraordinary right of termination . The credit institutions that emerged from the institutions of the GDR or were taken over by other credit institutions were obliged to take over the old credit agreements - and had to notify the borrowers of this, including the adjustment to the market interest rate, by September 30, 1991 . An adjustment to the market interest rate could already be made with effect from October 3, 1990. At the same time, the borrowers were granted an extraordinary right of termination - which had to be exercised within six months.

In order to avoid unnecessary hardship, the borrowers could apply for an interest subsidy from the federal government. This interest subsidy was staggered both in terms of amount and time and was awarded according to various criteria . For example, borrowers who had an interest-free old loan from October 3, 1990 to June 30, 1991 received interest subsidies of 8 percent and from July 1, 1991 to December 31, 1992 of 4.5 percent. For old loans that were subject to interest of up to 1 percent, the borrowers received interest subsidies in the period from October 3, 1990 to June 30, 1991 at 6 percent and from July 1, 1991 to December 31, 1992 at 2.5 percent . There was also a special regulation for so-called “ young married couples ” - here, upon request, the interest for the period from October 3, 1990 to December 31, 1992 was assumed at the market rate. Furthermore, there were similar interest rate subsidy programs for different credit areas, which are all identical in terms of their system and only differ in the amount of interest subsidy.

Since numerous banks and savings banks had forgotten to inform their borrowers of this law in the turmoil of the time of reunification, a repayment claim has arisen for thousands of borrowers, as the BGH in its judgment XI ZR 48/99 and several regional courts in various judgments in such cases , see an unlawful enrichment of the credit institutions , which retrospectively leads to a statutory interest on the loan. The statutory interest rate is 4.00%.

Original legal text

KredAAG § 1

  1. Credit institutions can adjust the interest rate for loans that were granted in the German Democratic Republic up to June 30, 1990 by unilateral declaration to the borrower with effect from October 3, 1990 to the market interest rates existing at that time, unless the adjustment has already been made was or is permissible on the basis of legal provisions of the German Democratic Republic. The declaration according to sentence 1 must have been received by the borrower by September 30, 1991. The determination of the service is to be made at reasonable discretion. The borrower can terminate the loan agreement within six months from receipt of the declaration.
  2. At the same time as making the declaration in accordance with Paragraph 1 Clause 1, credit institutions can determine by unilateral declaration to the borrower that the interest and repayment modalities for loans granted by the German Democratic Republic up to June 30, 1990, should be paid by July 1 1991 to be adapted to the then existing market modalities. The borrower has the right within two months of receiving the declaration pursuant to Paragraph 1 Clause 1 to request the credit institution to revise the interest and repayment terms within the framework of the conditions usually offered by the credit institution for the conclusion of new credit agreements. The borrower can terminate the loan agreement within six months - after receipt of the declaration according to sentence 1 or - if the credit institution does not agree to the contract adjustment required by the borrower according to sentence 2 within one month.
  3. The credit institution and the borrower can agree otherwise.
  4. Paragraphs 1 and 2 do not apply to loans on reduced terms to young married couples in accordance with the ordinance of the German Democratic Republic of April 24, 1986 (Journal of Laws of I No. 15 p. 244) as amended.

KredAAG § 2

  1. For the loans referred to in Section 1 (4), the Federal Government shall pay the market interest rates to the credit institutions. Section 1 (1) sentence 3 applies accordingly.

KredAAG § 3

  1. Insofar as, in the area designated in Article 3 of the Unification Treaty, loans for the creation and maintenance or improvement of private living space have been granted on the basis of legal provisions, the borrowers will receive temporary interest subsidies for these loans on request, provided they have received the declaration pursuant to Section 1 (1) sentence 1 is. Interest subsidies are calculated on an annual basis according to the loan amount on which the interest calculation by the credit institute is based.
  2. Loans in accordance with paragraph 1 sentence 1 are in particular those that are in accordance with the ordinance on the financing of construction measures for the creation and maintenance of private living space of April 28, 1960 (Journal of Laws I No. 34 p. 351) in its current version or in Article 20 of this ordinance has been granted.

KredAAG § 4

  1. Insofar as no interest was to be paid on June 30, 1990 due to legal provisions or contractual agreements for the loans referred to in § 3, the interest subsidies amount to 8 percent from October 3, 1990 to June 30, 1991 and from July 1, 1991 to as of December 31, 1992 to 4.5 percent.
  2. Insofar as these loans had an annual interest rate of up to 1 percent on June 30, 1990, the interest subsidies amount to 6 percent from October 3, 1990 to June 30, 1991 and from July 1, 1991 to December 31 1992 to 2.5 percent.
  3. To the extent that on June 30, 1990 these loans were subject to interest of more than 1 percent to 3 percent annually, the interest subsidies from October 3, 1990 to June 30, 1991 amount to 2 percent.

KredAAG § 5

  1. Natural persons who have been granted loans for the construction, modernization, repair or purchase of their own homes in the area specified in Article 3 of the Unification Treaty on the basis of legal provisions (borrowers) will receive temporary interest subsidies for these loans on request, provided that the declaration is made according to § 1 Paragraph 1 Clause 1 has been received. Section 3 (1) sentence 2 applies accordingly.
  2. Loans according to Paragraph 1 Clause 1 are in particular those that are made in accordance with the Ordinance on New Buildings, Modernization and Repair of Homes - Home Ownership Ordinance - of August 31, 1978 (Journal of Laws of I No. 40 p. 425) or those in § 15 Para. 2 of this Ordinance have been granted.
  3. Paragraph 1 Clause 1 also applies to natural persons who have taken over homes built by socialist cooperatives, cooperative agricultural, forestry and food industry establishments or state-owned enterprises and who have entered into existing credit agreements by law.

KredAAG § 6

  1. If no interest was to be paid on June 30, 1990 for the loans referred to in Section 5, the interest subsidies amount to 5 percent from October 3, 1990 to December 31, 1990 and from January 1, 1991 to December 30, 1990. June 1991 to 2 percent.
  2. If these loans had an annual interest rate of 1 percent, from October 3, 1990 to December 31, 1990, interest subsidies of 2 percent will be paid.

KredAAG § 6a

  1. The replacement of the loans referred to in Sections 3 and 5 by other means of financing does not affect the borrower's entitlement to interest subsidies.

KredAAG § 7

  1. The interest subsidies are to be paid by the country in which the construction work was carried out. Interest subsidies that have been paid by a state are reimbursed by the federal government in the amount of 60 percent.
  2. The borrower's claim for payment of the interest subsidy is to be asserted by submitting an application to the credit institution with which the credit agreement exists.
  3. Applications for payment of an interest subsidy in accordance with Section 3 (1) and Section 5 (1) can no longer be submitted after March 31, 1996.

KredAAG § 8 Lapse of interest from obligations secured on land that arose before June 28, 1948

  1. Arrears interest from loans and other claims secured by mortgages on land located in the area specified in Article 3 of the Unification Treaty and based on obligations that arose before June 28, 1948, are for the period up to June 30, 1990 expired if they were deferred by statutory provisions. If the debtor has paid such interest after June 30, 1990, he is entitled to a refund.
  2. Paragraph 1 applies accordingly to the interest from the property liens specified there.

KredAAG § 9 Expiry of interest from development loans to private landlords

  1. Arrears interest on loans that were granted by credit institutes of the former German Democratic Republic to private landlords of residential and commercial space and that are secured by building land charges or building mortgages on properties in the area specified in Article 3 of the Unification Agreement are for the period up to June 30, 1990 expired if they were due or deferred by statutory provisions.
  2. Section 8 Paragraph 1 Clause 2 and Paragraph 2 apply accordingly. If further mortgages have been entered for outstanding interest, these also expire.
  3. If the development mortgage or mortgage exists on property or buildings that have been used both by the owner and by third parties, the interest mentioned in paragraphs 1 and 2 expire in the proportion that corresponds to the proportion of the area used by third parties in terms of space and time.