Schufa Compensation from banks for incorrect credit agency reports

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9. Dezember 2024

Development of case law on compensation for false Schufa entries

The Schutzgemeinschaft für Kreditsicherung (Schufa for short) operates a system of mutual information about customers. Incorrect entries can therefore have painful consequences; for example, they can lead to loans being cancelled or requested loans not being granted. In short, most people are now more afraid of the Schufa than of their mother-in-law.

What is the legal position?

In late 1980s, the Higher Regional Court of Frankfurt (Oberlandesgericht Frankfurt), 1988-01-06, 17 U 35/87 and 17 U 203/87, had to decide on the claims of a bank customer whose data had been intentionally transmitted to Schufa by a credit institution. The court resolved the issue by applying Section 824 of the German Civil Code (Bürgerliches Gesetzbuch). As early as the beginning of the last century, the legislature provided special protection for commercial honour:

(1) Anyone who, contrary to the truth, asserts or disseminates a fact that is likely to endanger the credit of another or to cause other disadvantages for his acquisition or advancement shall compensate the other party for the resulting damage even if he does not know the untruth but must know it.

(2) The communicator is not liable for damages due to a communication whose untruthfulness is unknown to the communicator if he or the recipient of the communication has a legitimate interest in it.

In a 2004 ruling (case reference 5 U 862/03), the Higher Regional Court of Thuringia relied on Section 28 of the Federal Data Protection Act to establish the basis for claims for damages under the Federal Data Protection Act.

Problems always arise in the area of the damage: the party causing the damage must then make good the damage. In terms of the proceedings, the plaintiff bears the burden of proof for the ‘often very difficult to prove untruthfulness of the alleged facts, their suitability for jeopardising credit, the fault of the person acting – which is not assumed – and the damage incurred, whereby for the latter, the overwhelming probability of the causality of the assertion, e.g. for a decline in sales, is sufficient.’ – Quote from the commentary on § 824 BGB; Reichold in: jurisPK-BGB, 4th edition 2008; the Federal Court of Justice ruled in the well-known decision Kirch vs. Deutsche Bank AG XI ZR 384/03 that claims for damages exist. It must only be conclusively demonstrated what the contractual and financial situation would have been without the incorrect notification.

Change in the legal situation due to the General Data Protection Regulation

Damages for incorrect entries in the SCHUFA database refers to the statutory damages that individuals can claim when incorrect information affects their creditworthiness in Germany. The SCHUFA database is operated by SCHUFA Holding AG, the Schutzgemeinschaft für allgemeine Kreditsicherung (Organisation for General Credit Protection), and contains extensive credit-related information on millions of individuals and companies. Errors in this database can lead to significant financial disadvantages, such as credit denials or increased interest rates, which underlines the importance of maintaining accurate credit records.

Studies have shown that about one in three SCHUFA reports may contain inaccuracies, ranging from outdated addresses to fraudulent entries, which can significantly affect an individual’s creditworthiness.

The consequences of such erroneous entries are not only financial, but can also affect personal well-being, causing stress and reputational damage. Therefore, individuals have the right to challenge these inaccuracies and seek redress under the General Data Protection Regulation (GDPR) and German data protection laws to obtain compensation.

Compensation for damages due to incorrect Schufa entry

The legal framework for claiming damages includes both material and immaterial damages. Material damages refer to direct financial impacts, while immaterial damages may include psychological stress and stigmatisation. German courts have recognised the possibility of damages without extensive proof of specific damages, thereby recognising the importance of individual rights in the context of automated decision-making processes related to credit scoring.

When processing erroneous entries, individuals must follow a structured dispute resolution procedure involving both SCHUFA and possibly reporting creditors. The legal options available to affected consumers underscore the need for transparency and accuracy in credit reporting to balance the interests of the business community with the individual’s right to protect their financial well-being.

SCHUFA database

The SCHUFA database is a comprehensive collection of credit-related information in Germany, operated by SCHUFA Holding AG, the Schutzgemeinschaft für allgemeine Kreditsicherung (Organisation for General Credit Protection). The SCHUFA was founded in 1927 by a consortium of German banks to facilitate informed credit decisions by centralising credit data.

Structure and Function

The SCHUFA collects and processes data on the financial behaviour of over 68 million individuals and 6 million companies in Germany, totalling approximately 943 million individual data records.

Personal information: This includes name, date of birth and current and previous addresses.
Credit-related information: SCHUFA receives data from its member companies on credit cards, leasing contracts, current accounts, loans (both current and repaid), personal bankruptcies and other financial transactions. The information collected enables SCHUFA to create creditworthiness assessments and reports that are crucial for companies to assess the creditworthiness of potential customers. These reports are based on data from contractual partners who are required to inform their customers about the data transfer to SCHUFA.

Data collection and data protection

While SCHUFA maintains a robust database, it does not collect personal data directly from consumers. Instead, it relies on member companies to provide relevant data. The information stored does not include assets, income, occupation, marital status, nationality, or political and religious beliefs

This selective data collection is subject to the German Federal Data Protection Act, which protects the privacy of consumers while enabling companies to effectively assess creditworthiness. Consumers have the right to access their SCHUFA data and can request their information through certain channels

This transparency is part of the SCHUFA’s commitment to data protection and the ethical handling of personal data in credit checks.

Incorrect Entries

Incorrect entries in the SCHUFA database can significantly impact a person’s creditworthiness and often lead to negative consequences such as credit denials or unfavourable terms. Various factors contribute to these errors, and there are established procedures for correcting them.

Types of incorrect entries

Confusion of persons

Persons

A common cause of incorrect entries is the confusion of personal information, where the names and addresses of different people can be mixed up. In such cases, the consumer concerned should contact the credit reference agency directly to correct the incorrect information

Incorrect entries

Not all entries in the SCHUFA database are accurate. According to studies, about one in three SCHUFA reports contains incorrect or outdated information

Some of the most common inaccuracies include outdated addresses, paid debts that are still reported as unpaid, and accounts that no longer exist. Consumers are encouraged to regularly request their own SCHUFA reports to identify and dispute these inaccuracies

Outdated or duplicate accounts

Errors can also result from outdated account information or duplicate entries. Outdated debts that have been paid may still appear and distort the consumer’s financial profile. Duplicate accounts can inflate perceived debt and negatively impact credit scores. Consumers should carefully review their reports for such discrepancies, including incorrect account balances and

Fraudulent Accounts

Fraudulent accounts or activities are alarming signs of identity theft. These entries represent obligations that the consumer has not authorised and seriously damage their creditworthiness. Immediate identification and correction of fraudulent entries is essential to maintaining a fair credit history.

Correcting incorrect entries

Consumers have the right to dispute incorrect entries on their SCHUFA reports. If they notice inaccuracies, they should document the discrepancies and contact SCHUFA for correction. The process often involves submitting relevant documents that prove the error claim, and SCHUFA is obliged to investigate and resolve these disputes in accordance with the General Data Protection Regulation (GDPR).

If creditors have reported incorrect information, it is also advisable for consumers to contact those creditors directly to seek corrections to their reports. While the investigation is ongoing, SCHUFA is required to block the sharing of the disputed entry with other banks or creditors

If disputes cannot be resolved through direct negotiation, consumers may consider contacting an ombudsman or legal counsel.

Individuals‘ legal rights

The General Data Protection Regulation (GDPR), which has been in force since 25 May 2018, provides a robust framework for protecting individuals’ rights over their personal data, particularly in contexts involving automated decision-making and credit scoring, such as those managed by SCHUFA in Germany. According to Article 22 of the GDPR, individuals have the right not to be subject to decisions based solely on automated processing that produce legal effects concerning them or significantly affect them

.Right to deletion and compensation

Individuals have the right to request the deletion of incorrect entries in the SCHUFA database. For minor claims up to €2,000 that are settled within six weeks, individuals can have these entries deleted early, provided there are no other negative entries

In addition, creditors may, under certain conditions, request a deletion as a gesture of goodwill, for example, if the claim was settled within 100 days or if at least 18 months have passed since the payment and there are no other negative entries.

If attempts to resolve issues with incorrect entries are unsuccessful, individuals can take legal action. They have the right to request the court to delete incorrect entries or to demand compensation for damages incurred as a result of inaccurate data. This can include both material and non-material damages, such as stress or reputational damage.

In particular, the Federal Court of Justice in Germany has recognised the potential for a basic compensation without the need to prove a specific damage.

Documentation and legal advice

To effectively assert their rights, individuals are advised to keep thorough documentation of all relevant correspondence and actions taken to rectify SCHUFA records. Legal advice is recommended to navigate the complexities of GDPR compliance and ensure that all the necessary steps are followed correctly

It is vitally important that individuals are aware of the time limits associated with these legal actions, as there are several legal requirements that must be met to pursue claims under the GDPR

Jurisdiction and enforcement

It is important to note that the responsibility for enforcing these rights lies with the data subject – the person whose data is involved. This includes the right to take action against SCHUFA or the entity that transmitted the data, as they are responsible for data protection violations

In the event of violations of the provisions of the GDPR, such as the unauthorised transmission of data, individuals can claim damages

Compensation

The question of compensation in the context of erroneous entries in the SCHUFA database is governed by several legal principles, in particular the General Data Protection Regulation (GDPR) and German data protection laws.

Types of damages

Material damages

Material damages are financial losses that can be directly attributed to the erroneous entry in the SCHUFA database. These can be material losses, such as being denied a loan or facing higher interest rates due to a poor credit rating resulting from incorrect data.

Non-material damages

Non-material damages refer to intangible effects such as stress, stigmatisation or a decline in living standards. Notably, the European Court of Justice (ECJ) has established that the mere loss of control over personal data does not automatically qualify as non-material harm; plaintiffs must provide concrete evidence of an adverse effect. However, a ruling by the German Federal Court of Justice has stated that under certain circumstances, the loss of control over one’s own data can constitute non-material damage.

Legal basis for claims

In order to successfully claim damages, several conditions must be met:

Violation of the GDPR: There must be a proven violation of the GDPR, such as the unauthorised transfer of personal data without a legal basis.
Causality: The plaintiff must prove that the damage incurred was directly caused by the incorrect entry in the SCHUFA database.[9]
Fault: The data processor, in this case SCHUFA, must have acted culpably, which may include negligence or intentional disregard of data protection regulations.
Burden of proof: The burden of proof lies with the data subject, who must substantiate their claims with appropriate documentation and evidence of the damage suffered.[9][13]

Claims for damages

Individuals affected by unauthorised entries in the SCHUFA database can claim damages for both material and non-material damages. According to Article 82 of the GDPR, plaintiffs have the right to claim damages, but they must provide concrete evidence to support their claim. It is noteworthy that recent court rulings suggest that even in cases where concrete proof of damage is difficult, basic compensation is possible without explicit proof of damage, as demonstrated by the ruling of the Federal Court of Justice from the end of 2024.

Legal action

Should attempts at informal resolution fail, individuals can take legal action

through the courts.

Removal of incorrect entries: Legal action can be taken to force SCHUFA to remove incorrect entries from its database[9].
Damages claims: In cases of proven damages, individuals may be entitled to monetary compensation through civil litigation, supported by evidence of the impact of the incorrect entries on their financial situation and their personal rights.[10][13].

Procedure for rectifying

Incorrect Entries

To correct inaccurate entries in the SCHUFA database, individuals must follow a structured process to ensure that their credit reports accurately reflect their financial history.

Request a SCHUFA Report

The first step is to obtain a copy of your SCHUFA report. This can be done online or by post on the official SCHUFA website. Individuals will need to provide personal information such as name, address and date of birth. A free copy of the report can be requested once a year, while expedited reports are available for a fee of €29.95.

Regularly reviewing this report is crucial, especially before applying for loans or signing leases, as it allows individuals to catch any inaccuracies

Identifying and Documenting Errors

Once you receive your SCHUFA report, it is important to review it thoroughly for inaccuracies or outdated information. The most common types of incorrect entries include outdated addresses, payment claims marked as unpaid that have been settled, and entries based on a mix-up

Individuals should keep a record of any discrepancies and collect relevant documentation to support them.

Monitor progress and seek confirmation

During the dispute resolution process, SCHUFA is obliged to place a block on the disputed entry while its accuracy is resolved

After the correction, individuals should request a new copy of their SCHUFA report to confirm that the changes have been implemented. This proactive approach is essential to protect one’s creditworthiness, as incorrect entries can have a significant financial impact.

Understand the impact of negative entries

It is important to be aware that negative entries can remain on a SCHUFA report for a set period of time, usually three years after a debt has been paid off. Individuals should be aware of these time periods and actively manage their credit reports to avoid any potential impact on their financial opportunities, such as securing loans or leases. By following these steps, individuals can effectively address inaccurate entries in the SCHUFA database and protect their financial future.

Case Studies – Overview of the law

In the context of claims for damages for inaccurate entries in the SCHUFA database, the legal provisions of the General Data Protection Regulation (GDPR) and the German Federal Data Protection Act (BDSG) play a crucial role. Article 22 of the GDPR sets out the conditions under which individuals must not be subject to decisions based solely on automated processing, including profiling, which is highly relevant when discussing credit scores and the impact of inaccurate data on individuals‘ financial situations.

Relevant court cases

Case involving automated processing

In a noteworthy case, the court upheld that the cumulative conditions of Article 22 GDPR were met. The decision included the view that a creditworthiness calculation can be categorised as a ‘decision’ that has significant effects on the individual

The court identified three essential conditions: the existence of a decision, the dependency on automated processing and the resulting legal effects on the data subject

This illustrates the range of what constitutes a decision under EU law and highlights the need for human intervention in cases where individuals are exposed to significant effects as a result of automated decision

assessments.

The role of national courts

Furthermore, the interpretation of relevant EU law depends largely on the discretion of national courts. According to the Court’s settled case-law, national courts must assess the need for preliminary rulings in the light of the specific circumstances of each case. This autonomy is crucial as it allows national legal systems to adapt to their respective contexts while upholding EU law

The absence of EU rules means that Member States retain the power to establish procedures for the protection of rights derived from EU law, as long as they do not undermine the effectiveness of EU law

Balancing interests in credit reporting

A key aspect of these cases is the balance of interests between economic necessities and individual data protection rights. For example, Section 31 of the German Federal Data Protection Act (BDSG) stipulates that certain economic interests may take precedence over the right to protection of personal data. However, such provisions must be in line with the requirements of the GDPR, which emphasises the protection of individuals from potentially discriminatory automated decisions.

Delete SCHUFA entry? Dr Schulte, lawyer, provides effective help!

SCHUFA (Schutzgemeinschaft für allgemeine Kreditsicherung) is the largest credit reporting agency in Germany and plays a crucial role in assessing the creditworthiness of private individuals and companies. But what can you do if a negative SCHUFA entry is blocking your financial plans?

Problems with a negative SCHUFA entry?

A negative SCHUFA entry often arises faster than you think – whether it’s due to:

Unpaid bills (knowingly or unknowingly)
Disputes with companies
Claims that have been wrongly reported

Such entries can have far-reaching consequences, such as being denied credit, energy or mobile phone contracts. It becomes particularly problematic when companies unlawfully report entries or make threats to enforce claims.

Your rights: Incorrect or prematurely reported SCHUFA entries can be contested and, under certain circumstances, deleted prematurely.

Why a specialised attorney is important

Experience shows that those affected often fail without legal support. Lawyers can:

Identify and dispute incorrect entries
Request deletion from the SCHUFA or reporting companies
Take legal action against unjustified entries

Dr Thomas Schulte, a lawyer in Berlin, has specialised in representing SCHUFA victims for many years. With careful preparation, we often achieve the deletion of unauthorised entries within 1 to 3 weeks.

SCHUFA scoring and your rights

SCHUFA scoring is not only based on negative entries, but also on so-called ‘soft’ criteria such as:

Number of credit cards
current accounts with overdraft interest
Existing mobile phone or electricity contracts

According to SCHUFA, more than 500,000 pieces of information are provided daily, although not everything is always correct. The General Data Protection Regulation (GDPR) gives you rights to defend yourself against unauthorised entries or incorrect data. Take advantage of these opportunities!