The Bank Account Attachment Act: judicial responsibilities have to remain the bailiwick of courts of law

by Finanzplatz München Initiative

Munich Financial Center Initiative (fpmi) maintains that the objective of the proposed reform of the Bank Account Attachment Act should be the maximum possible reduction of the complexity of the bank account attachment procedure experienced by all parties involved. The formulation of the Act has given rise to proposals foreseeing the transferring of fundamental responsibilities from courts of law to banks. The Initiative rejects such transfers. By way of an example: banks should not be charged with the establishing of ceilings on debtors’ non-attachable amounts.

An item to be corrected by the reform is the fact that banks cannot now invoice the debtors or their creditors for the costs incurring from the processing of attachments of bank accounts, notwithstanding the fact that these costs, due to the large amount of personnel time incurred in the processing, are high. The defraying of the costs is currently carried out through their apportionment in the fees charged for the maintenance of all of the banks' accounts. A change would enable this procedure to exemplify the “responsible party pays” principle.

A reduction in the costs arising to banks from such procedures would facilitate the offering of Giro accounts for all, regardless of their income.

The following statements detail the positions taken by members of Munich Financial Center Initiative on the reform of the Bank Account Attachment Act and on Giro accounts for all.

Association of Bavaria's banks: Shifting of responsibilities won’t lead to the achieving of objectives

Germany’s federal government has announced plans to reform the Bank Account Attachment Act. We welcome this move. The reform’s objective should be to achieve the maximum possible reduction of the complexity of the bank account attachment procedure experienced by all parties – debtors, creditors, courts of law and banks involved.

It takes a lot of staff time to process such attachments, which are thus very costly for banks. One of our member banks receives an average of 1,300 attachment writs every day. These are accompanied by a further 2,000 letters on writs already being processed by the bank.

The draft of the Act contains a fallacious basic assumption: that the attachment of bank accounts into which wages and salaries are paid constitutes the exception in Germany. The opposite is true. Parties with practical experience always secure an attachment of the debtor’s bank account prior to the garnishing of his or her remuneration. Germany’s Federal Supreme Court has issued decrees forbidding banks from levying fees for the processing of attachment writs (please see Federal Supreme Court in Civilian Cases 141, 380 = WM 1999, 1271; Federal Supreme Court WM 1999, 2545, 2546). The banks are thus forced to defray these costs by apportioning them among all of their bank accounts. The draft foresees the transferring of other judicial activities, with these including the establishment of ceilings on attachment-free amounts, to the banks. These transfers would increase the costs borne by the banks and their customers. It would also give rise to a greater number of court cases.

Current cases show that this shifting of responsibilities to the bank at which the debtor maintains his or her account is not efficacious. This shifting has been undertaken by several courts, which issued blanket verdicts decreeing the establishment of ceilings on attachment-free amounts for bank deposits stemming from remuneration for work (§ 850k ZPO – Civil Lawsuit Code). The problem with this is that the bank does not possess all requisite information on the debtor’s financial situation. Another problem is determining whether or not the bank deposits stem from remuneration for work. The risk of misassessment is thus very high.

There are thus cogent reasons for the current law’s assigning of the responsibility for the determination of the amount of the debtor’s recompense to be exempted from the garnishing procedure to courts of law. This arrangement has a further advantage. Debtors and creditors are entitled to appeal the decisions reached by the court of law. These reasons mandate the refraining from change in the arrangement.

Banks would also face further large-scale costs from the proposed setting up of bank accounts exempt from attachment, as doing such would require the reconfiguration and greater use of in-house IT. This also applies to the limiting of the effective term of writs on attachments and bank transfers to 90 days. This proposal would require the reapplication for these writs on a repeated basis. These writs would also have to be decreed by the courts and processed as new items by the banks. Both proposals would thus increase the amount of red tape burdening banks.

The draft of the Act does contain highly welcome simplifications of procedure: the proposals that writs apply to the attachment of both current and future deposits, and that the deadline for the submission of garnishee statements be extended to four weeks.

Public sector-supplied child support payments are to be exempted from attachment, regardless of whether the payment is tax-derived or whether it is supplied from a social security account. We reject the restriction of this provision to the former kind of support, as it has proven to be virtually impossible to distinguish between the two.

Association of Bavaria’s cooperative banks and credit unions: do not want to be the executive arm of courts of law

The Association maintains that the regulations governing the attachment of accounts into which remuneration from work is paid have proven to be efficacious, with this especially applying to § 850k of Germany’s Civil Lawsuit Code. For this reason, great prudence has to be exercised in the undertaking of any changes. These, in turn, have to adequately take into account the “responsible party pays" principle.

The adherence to this principle causes the Association to especially reject proposals to oblige the bank maintaining the debtor’s account to establish the ceiling on its attachment-free amount. A bank should not be forced to be the executive arm of courts of law, as it has neither the powers nor the information (on, for instance, how many parties the debtor is required to support) to calculate this amount on an incontrovertible basis.

These considerations also led legislators to add for debtors a proceeding instituted upon petition to § 850k of Germany’s Civil Lawsuit Code (for further information, please see the Federal Parliament’s Document 8/693 page 49). It is also for this reason that the Federal Constitutional Court criticized as being illegal the practice being considered by several district courts in Bavaria of shifting public sector responsibilities to banks. The Constitutional Court declared the proceeding instituted upon petition to be constitutional.

A great deal of staff time goes into the processing of attachment writs on bank accounts. This processing cannot be automated. This means that this processing is highly expensive for banks, which are not allowed to defray these costs by demanding processing fees from debtors or creditors. As a general rule, this defrayment is accomplished by apportioning the costs – in the form of bank account maintenance fees – among all of the bank’s customers. A change in this regulation would therefore constitute a return to the adherence of the “responsible party pays” principle. The costs incurred by the bank could be included in those of forced enforcement. This move is not designed to create new sources of income for banks, but rather to ensure them of receiving the recompense for non-bank activities customarily forthcoming in other EU member countries.

We are also of the opinion that the burden of these costs and the expenditure of staff member time necessitated by the processing of bank account attachment writs received constitute an obstacle to the banks’ willingness to provide greater support to the “Giro accounts for all” movement. Issued by their state and country-wide associations, the position papers issued by Germany’s banks on “Giro accounts for all” indicate the banks’ readiness to further shoulder their social and political responsibilities. Although the conventional wisdom believes otherwise, and aside from a number of exceptions, all of Germany’s residents either have giro accounts, or can easily open them.

The Association regards the extending of responsibility or even a legal obligation to accept contracts as being highly and innately counterproductive. No such compulsory contracts will be required, should the legislators formulate the Act in a way making the attachment of bank accounts a ‘no net costs proposition’ for the banks.

Bavaria’s economics ministry: no legal requirements to provide compulsory contracts setting up “Giro accounts for all“

Banks are being heavily encumbered by so-called “costs of bureaucracy”. These arise from the large number of obligations existing to render information and reports and to register items and operations. Considerable expenditure is also incurred through the conducting of bank statement procurement procedures, through actions necessitated by the fight against money laundering, and through the processing of bank account attachments. The latter is increasing.

The banking associations which are members of Germany’s ZKA (Central Banking Committee) have voluntarily committed themselves to maintaining a Giro account for every single resident in the country, no matter what level of income he or she might have. These accounts permit customers to deposit funds. This commitment is associated with considerable cost-related risks, in view of the fact that such accounts are subject to attachment on a greater-than-average basis.

The fourth report issued by Germany’s government on the implementation of the recommendations made by ZKA in 1995 on the “Giro account for all” notes critically that a large number of socially-disadvantaged citizens were being denied such accounts. A number of parties began calling for the offering of such accounts to be compulsory on the part of the country’s banks.

Bavaria’s ministry for economic affairs, infrastructure, transport and technology (StMWIVT) has long been an advocate of a reduction of the costs incurred by banks when fulfilling responsibilities to the general public. This thrust is to be maintained in the reforming of the Judicial Procedures Act. A reduction of the costs incurred by banks in carrying out bank account attachments could well facilitate the setting up of “Giro accounts for all”. The ministry continues to reject the enactment of a legally-mandated obligation designed to assure the setting up of such accounts. The ministry does, however, expect the banks to take the commitment which they made in 1995 into greater account.

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