Legal clarity made simple: Volksbank Heidelberg checks interest rate adjustment clauses with artificial intelligence 

With Germany’s Federal Court of Justice’s ruling on premium savings contracts, banks and customers gained legal certainty, but banks are now faced with an enormous additional workload. Heidelberger Volksbank would have had to check a large amount of contracts manually and within a very short period of time to avoid lawsuits.

The Company 

As a cooperative bank, Heidelberger Volksbank belongs to the group of Volksbanken and Raiffeisenbanken. Change is part of the DNA of the financial institution that was founded in 1874. The bank thus follows its own Heidelberg path: it relies on new technologies to meet modern expectations for speed and accessibility, but it keeps people and personal service as core values. Customer satisfaction is its guiding principle. Therefore it was a logical step for the Management Board to deal quickly and proactively with the ruling on interest clauses in premium savings contracts. 

The Challenge 

Premium savings contracts were a popular financial product for many years. At Volksbank Heidelberg, too, numerous customers chose these contracts to build their savings. However, the German Federal Court of Justice confirmed in October 2021 that contracts with variable interest rate clauses are illegal if they link the interest rate to an index that is not clearly defined. 

After years of legal insecurity, there is clarity: Volksbank Heidelberg had to check all its premium savings contracts for legal compliance to adjust its provisions and avoid lawsuits from customers. After all, since the introduction of model declaratory actions (Musterfeststellungsklage), the likelihood of individuals claiming their rights has increased considerably. The bank had to reckon with an additional workload and costs of several weeks. To minimize the effort, the bank looked for digital tools that could support the verification process.

The Solution

Even before the Federal Court of Justice’s latest ruling, the management of Volksbank Heidelberg had prepared for the possibility of it confirming previous case law. The bank learned about thingsTHINKING and semantha® through a personal recommendation. 

At first, the employees were skeptical. The application’s promise to securely check thousands of documents for legal compliance within a few days seemed too good to be true. thingsTHINKING offered a live demo so that those responsible could see for themselves how the software works. In October, Volksbank managers and thingsTHINKING’s AI experts came together for a meeting and the decision-makers got a first-hand impression of the software’s performance.

What is special about semantha®? Thanks to artificial intelligence (AI), the software understands documents at the level of meaning, without lengthy training. For Volksbank, this meant that even if the interest clauses were worded differently, semantha® could reliably identify relevant phrases and assess whether a clause was definite or indefinite and therefore illegal. The live demo of semantha® convinced the project managers. Internal coordination followed, and in January Volksbank kicked off the project.  

Together with their contact person from thingsTHINKING, the project manager chose examples of wordings for interest clause, so-called hotspots, to give semantha® a reference point for its review. The bank decided not to implement the software on its premises for this one-off project, but instead to have only the test results given to them for a quick post-assessment by a staff member. This further reduced costs and effort.

The AI experts at thingsTHINKING scanned the documents via OCR and then had semantha® check them automatically. The review process itself was completed within three days.

The Benefits 

In February, less than four weeks after the project’s start, Volksbank Heidelberg had reviewed the last results. Based on semantha®’s audit, the bank was able to adjust its provisions. Should customers complain about their premium savings contract in the future and refer to the ruling, Volksbank’s employees are now able to react quickly and refer to the audit results in their response. 

While many other financial institutions are still struggling with the uncertainty factor of premium savings contracts, Heidelberger Volksbank has already closed the chapter and can once again turn its attention to future issues.

“The previous time-consuming review of our contracts and their documentation required 20 working days. The AI-based solution had done the same work in 2 hours. This resulted in a 98.75% reduction in the resources required for this – sensational!”

Christian Murr, Division Manager Board Staff, Heidelberger Volksbank

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