Schufa – More power than your mother-in-law?

Schufa – More power than your mother-in-law?

Legal disputes are being fought over SCHUFA. SCHUFA collects data from its contractual partners about their payment history. In our modern information society, a bad SCHUFA entry can have consequences for those affected that are similar to the plague in the Middle Ages. They are essentially excluded from business transactions.

More power than the mother-in-law

Unfortunately, some companies threaten those affected with negative entries in order to improve their payment history. In many cases, services have only been provided because the alleged debtor was afraid that a false SCHUFA entry would, for example, harm their career prospects. The information reported to SCHUFA is also available to other contractual partners. Information on non-contractual behavior is stored for three calendar years from the end of the year in which it was entered. This regulation complies with Section 35 of the Federal Data Protection Act. SCHUFA generally argues that it is dependent on the information provided by its contractual partners. Incorrect entries must also be deleted. In a ruling, the Frankfurt Court of Appeal has now decided that a customer’s dispute of a claim against a bank does not automatically mean that the bank is allowed to report a debt balance to SCHUFA (ruling of the Frankfurt Higher Regional Court, 23 U 155/03). However, this decision does not mean that the person concerned is unprotected against unlimited data collection. The Federal Data Protection Act regulates a minimum standard. It is always possible to lodge a complaint with the data protection officer of the federal states. However, it is clearly prohibited and also a criminal offense to threaten a negative entry in order to force payment. As a rule, however, it can be observed that business people now have more respect for the SCHUFA than for their otherwise all-powerful mother-in-law.

Changes since 2007

Much has changed since this article was published in 2007, because the General Data Protection Regulation in 2018 rendered the essential provisions of the Federal Data Protection Act obsolete. However, it is still true that a negative SCHUFA entry makes it difficult to participate in economic life.

With the introduction of the General Data Protection Regulation (GDPR) in 2018, data protection requirements in the EU have been tightened and standardized. For SCHUFA and its contractual partners, this means that they are now subject to stricter regulations regarding the processing and storage of personal data. Particularly important here are the principles of data minimization and transparency, which stipulate that only the information that is actually necessary may be collected and that data subjects must be fully informed about the use of their data.

A key point of the GDPR is the right to information (Art. 15 GDPR). Data subjects have the right to know what data is stored about them and to which third parties it has been passed on. SCHUFA is obliged to provide comprehensive information upon request. This gives consumers the opportunity to gain an overview of the information stored about them and to ensure that there are no incorrect or outdated entries.

Right to rectification and erasure of incorrect entries

The GDPR also strengthens the right to rectification (Art. 16 GDPR) and the right to erasure (Art. 17 GDPR). If incorrect information is entered into the SCHUFA database, the data subject has the right to request its correction or deletion. This is particularly relevant as SCHUFA entries are often based on information provided by contractual partners, which is not always accurate. Incorrect entries can quickly arise if, for example, an invoice is accidentally sent twice or a claim that has already been settled is reported as outstanding. An example: A customer pays an invoice on time, but the contractual partner nevertheless reports it to SCHUFA as an unpaid claim. Such an error can only be rectified by means of a correction, which often involves considerable effort on the part of the data subject.

SCHUFA is obliged to correct or delete these incorrect entries. If it fails to do so, those affected can contact the relevant data protection officer in their federal state or take legal action to enforce the correction.

Deletion of outdated entries: observe deadlines

Negative entries are generally stored by SCHUFA for three years, as stipulated in the BDSG. However, the GDPR now makes it possible to have outdated or unjustified data deleted more quickly. If, for example, the underlying claim has been settled, a request for deletion can be made, as this information is no longer relevant.

Nevertheless, there are exceptions where data may be stored for longer. For example, SCHUFA may retain certain data beyond the usual time limits for statistical purposes or to prevent fraud. The decision on deletion always depends on the individual case and requires careful examination.

Threats of negative SCHUFA entries as coercion

Another important point is the practice of some companies of threatening their customers with a negative SCHUFA entry in order to force them to pay. Such behavior can be classified as coercion under German law, especially if the claim is unjustified or disputed. Such threats are not only inadmissible, but also punishable by law and can be reported by those affected. This is enshrined in the Criminal Code and is intended to ensure that consumers are protected against misuse of SCHUFA entries.

Interview with Dr. Schulte on Stern TV on the subject of Schufa

Options for those affected by conflicts with SCHUFA

Despite the strengthened rights of consumers, dealing with SCHUFA is not always easy. However, if there are problems with an incorrect entry, those affected can take the following steps:

1. Obtain information: Obtain your own SCHUFA information regularly and check it for errors.
2. Request correction: Have incorrect or outdated entries corrected or deleted.
3. Seek legal assistance: If you encounter problems, consult a lawyer who is familiar with the current data protection legislation.

Those affected may even be entitled to compensation for Schufa entries and have a right to an individual review.

Conclusion: More rights, but also more personal responsibility

The new legal situation since the introduction of the GDPR has strengthened consumers‘ rights when dealing with SCHUFA. Nevertheless, SCHUFA entries remain a powerful tool that must be carefully checked and managed. Consumers should be aware of their rights and regularly check their data in order to identify negative entries at an early stage and have them corrected if necessary.

Important judgments of a general nature

Legal disputes surrounding SCHUFA have gained in importance in recent years, particularly as a result of landmark rulings by the European Court of Justice (ECJ). These rulings have not only strengthened consumer rights, but also raised fundamental questions about the admissibility of SCHUFA scores. Here are some of the most important rulings:

ECJ ruling of December 7, 2023 (Ref. C-634/21)

In this landmark ruling, the ECJ found that SCHUFA’s scoring system is inadmissible if contractual partners such as banks rely significantly on the SCHUFA score to make decisions on granting loans. The court ruled that such automated decisions in individual cases violate Article 22 of the General Data Protection Regulation (GDPR), which prohibits the use of personal data for fully automated decisions if these have a significant impact on the lives of the individuals concerned.

The ruling has far-reaching consequences for SCHUFA’s practices and could mean that banks and other contractual partners will have to adapt their decision-making processes to ensure that the SCHUFA score is not the sole basis for contractual decisions.

ECJ ruling on deletion periods for insolvency data (C-26/22 and C-64/22)

In these joined proceedings, the ECJ ruled that SCHUFA may not store data from the insolvency register for longer than permitted by the public insolvency register. In concrete terms, this means that insolvency data must be deleted after six months instead of being stored for up to three years as was previously the case. This decision is intended to enable those affected to make a quicker economic fresh start and prevent them from being classified as uncreditworthy on the basis of outdated data.

Judgment of the Frankfurt Higher Regional Court (23 U 155/03)

Another important ruling comes from the Frankfurt Higher Regional Court, which ruled that disputing a claim against a bank does not automatically mean that this claim may be reported to SCHUFA. This ruling protects consumers from receiving unjustified negative entries in their SCHUFA file when they dispute a claim.

Wiesbaden Administrative Court and referral to the ECJ

A case before the Administrative Court of Wiesbaden led to a referral to the ECJ in which a plaintiff was denied a loan due to a low SCHUFA score. The court had doubts about the compatibility of SCHUFA’s business practices with European data protection standards and referred the question to the ECJ. This ultimately led to clarification of the legal framework for the use of SCHUFA scores in credit decisions.

Judgment of the Mönchengladbach Regional Court (September 2, 2024, Ref.: 10 O 158/23)

In this judgment, SCHUFA was ordered to delete an entry regarding the settlement of a previous claim and all related entries from the plaintiff’s file. The court also ruled that SCHUFA is obliged to correct the plaintiff’s score values after deletion. This shows that, if claims have been proven to have been settled, the corresponding entries can be deleted, which has a positive effect on the score.

Judgments on damages

Hamburg Higher Regional Court, judgment of January 10, 2024 (Ref. 13 U 70/23)

In a landmark case, the Hamburg Higher Regional Court ruled that a customer of Barclays Bank is entitled to damages of €4,000 after unauthorized claims were reported to SCHUFA. The plaintiff had disputed his claim, but the bank nevertheless reported the outstanding claim to SCHUFA on several occasions, which led to a negative entry. The court found that there was no legitimate interest in the report and that the bank had violated its obligations under the General Data Protection Regulation (GDPR). This decision shows that particularly negligent conduct can lead to increased claims for damages

LG Hamburg, judgment of April 19, 2023

In a similar case, the Hamburg Regional Court already recognized a claim for non-pecuniary damages of €2,000 in the first instance because a negative entry was unlawful. It was emphasized that the report to SCHUFA should not have been made because the underlying claim was disputed and not enforceable.

LG Mainz, judgment of November 12, 2021 (Ref. 3 O 12/20)

The Regional Court of Mainz awarded a plaintiff damages of €5,000 after unauthorized data was transferred to SCHUFA. In this case, it was found that consent to the transfer of data had not been obtained and that the report was therefore unlawful.

Higher Regional Court of Dresden, judgment of November 30, 2021 (Ref. 4 U 1158/21)

The Dresden Higher Regional Court also ruled in favor of a plaintiff and awarded him damages of €5,000 for unauthorized data transfer.

Contact

Dr. Thomas Schulte

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A SCHUFA entry can have significant consequences for your financial options. But did you know that you have rights that protect you? Take advantage of the opportunity to gain clarity and strengthen your position with the legal expertise of Dr. Thomas Schulte.

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Helpful information in various languages

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English: Twoj Adwokat w Niemczech.

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Take advantage of this unique opportunity to place your SCHUFA matter in safe and competent hands.

1. Schufa scoring: The secret formula that decides your life (January 2025): In this article, Dr. Schulte sheds light on the lack of transparency in Schufa scoring and discusses the legal basis for data collection and the implications for consumers. The full article is available at: https://www.dr-schulte.de/schufa-scoring-die-geheime-formel/.
2. Schufa – When those affected go through the valley of tears (September 2024): Dr. Schulte describes the challenges faced by those affected by negative Schufa entries and provides advice on how to deal with such situations. More information is available at: https://www.drthomasschulte.de/schufa-tal-der-traenen/.
3. Schufa Holding AG deletes a negative entry by Pair Finance GmbH (January 2025): This article reports on a successful case in which an unauthorized Schufa entry was deleted and explains the legal steps that led to this. The article is available at: https://www.dr-schulte.de/schufa-pair-finance/.
4. 1-0 for Schufa victims – SCHUFA condemned (January 2025): Dr. Schulte analyzes a ruling by the Munich District Court that strengthens consumers‘ rights vis-à-vis Schufa and addresses the requirements for negative entries. Further details can be found at: https://www.dr-schulte.de/schufa-verurteilt/.
5. Despite residual debt discharge – Schufa entry by EON Energie Deutschland GmbH results in poor credit rating (March 2021): This article describes a case in which a negative Schufa entry remained despite residual debt discharge and discusses the legal implications. The entire article can be found here: https://www.dr-schulte.de/schufa-restschuldbefreiung/.
6. No completion note despite completion – Schufa Holding AG (March 2021): Dr. Schulte addresses the issue of missing completion notes at Schufa and the resulting consequences for those affected. More information can be found at: https://www.dr-schulte.de/schufa-erledigungsvermerk/.