Beneficiary's repayment obligation following bank guarantee by consumer securing third-party debt

Banking & Finance

In a recent decision, the Supreme Court extended the scope of the sections of the Consumer Protection Act that protect consumers that accede to a third party's obligation without any economic interest of their own.

The Supreme Court broke with previous case law and held that Section 25c of the Consumer Protection Act must be applied analogously (ie, "beyond its wording") if a consumer does not personally join a third-party liability as a joint debtor, surety or guarantor, but provides a bank guarantee securing such liability. Although the Supreme Court returned the case to the first-instance court, the guidelines drawn up in this decision will apply to any type of collateral provided in similar situations for the account of a consumer.

ILO-Newsletter, dd. 20 July 2018
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