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How Germany is making it easier for consumers to cancel contracts

On March 1st, Germany blew the cobwebs off its outdated contract law to give consumers a whole host of new rights. Here's what you need to know about the latest changes.

How Germany is making it easier for consumers to cancel contracts
A customer signs up to a new contract online. Photo: picture alliance/dpa/CLARK | CLARK

What’s going on?

Starting this March, an overhaul of consumer rights laws means that people in Germany will no longer be locked in for the long-haul if a contract automatically renews.

Instead, once a contract is up, companies will have to move people onto a flexible rolling contract that can be cancelled with just a month’s notice. 

So, if you’re the sort of person who signs up to a gym in a haze of ‘new year, new me’ optimism and then forgets about it entirely until you catch sight of your motheaten running shoes at the back of the wardrobe, never fear.

While you will have to keep the contract until the initial expiry date (say, at the end of a year), you won’t get signed up for yet another year if you forget to cancel in time. 

The changes will also make it easier for people to take advantage of special offers for new customers without worrying about being locked in to a higher tariff once the offer expires.

For example, if your energy company gives you a special discount on a yearly contract as a sign-up bonus, you can cancel it anytime after that year is up if it suddenly becomes unattractive. 

READ ALSO: INTERVIEW: How can consumers in Germany shield themselves from high energy prices?

Does that apply to old contracts or just new ones?

Unfortunately, it just applies to new ones at present. That means that any contract signed after March 1st, 2022, will only be allowed to extend on a rolling monthly basis after the initial term is up.

For older contracts, the old rules apply, so you could still end up being locked in for a further year if you don’t cancel in time.

So, should I cancel any old contracts?

Not necessarily. According to lawyer Carolin Semmler from the Consumer Advice Centre in North Rhine-Westphalia, it’s important to take a look at all the costs, terms and conditions before making a hasty decision.

“With a new contract, consumers are again bound to the minimum contract period,” Semmler explained to Munich’s Abendzeitung. Since minimum contract periods haven’t been changed, you could then find yourself locked into a fresh contract that has a minimum expiry date of 24 months. 

Hasn’t the government made similar changes before?

Well remembered! Last year in December, new amendments to the Telecommunications Act came into force, effectively making it easier for people to cancel contracts with mobile, landline and internet providers.

Much like these latest changes, the amendments stipulate that companies can no longer automatically renew a contract for longer than a month at a time. So after your 24-month mobile contract is up, for example, you’ll have the change to cancel it on a rolling monthly basis. 

Unlike the most recent changes, however, the new rules in the Telecommunications Act apply for both existing and new phone and broadband contracts. For more information on those changes, see the article linked below.

READ ALSO: How Germany has made it easier to cancel broadband and phone contracts

So what types of contract are covered by the new rules? 

Along with the broadband and phone contracts mentioned above, the new consumer rights will extend to a wide array of other contracts, from gym memberships to streaming services. 

The contracts can also include newspaper subscriptions, services such as music or language courses, and even the regular delivery of goods (i.e. grocery box subscriptions). This should also apply to electricity and gas contracts.

One key exception to the new regulation is insurance contracts – so be sure to cancel any unwanted travel insurance in time to avoid any unnecessary expense next year. 

Grocery deliveries

A couple recieve a grocery box. Subscriptions for the regular delivery of goods will also be included under the new rules. Photo: picture alliance / dpa-tmn | Marley Spoon

Will they still be able to charge over the odds for shorter contracts?

Thankfully, no. In fact, this is another really positive change for consumers. 

Since March, companies offering two-year contracts will be obliged to offer one-year contracts as well – and these shorter contracts aren’t allowed to be eyewateringly expensive in comparison with the longer ones. Price increases for 12-month contracts will be capped at 25 percent.

So for example, if a German newspaper offers two-year subscriptions at €20 per month, a one-year subscription can’t cost more than €25 a month. 

This should hopefully put an end to agonising decisions about which deal is really worthwhile and whether the amount your online Rechner (calculator) says you’ve saved is really a saving if you didn’t want a two-year subscription anyway.

What else is new?

Another key change is that the deadline for cancelling contracts ahead of their renewal is also becoming more generous. Previously, most customers only had until three months before the end of the contract to cancel it. 

For new contracts agreed after March 1st, customers will be able to cancel up to a month before the end-date. 

Last but certainly not least, contracts should soon be easier to cancel in another respect.

Rather than facing awkward calls with sales representatives or having to post or email written notices of terminations, companies will soon be required to allow people to cancel their subscriptions or contracts at the click of a button.

From July 1st, all companies will have to include a “cancellation button” on their websites that customers can use to express their desire to opt out of a contract as soon as it expires. 

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MONEY

Why German bank customers could soon pay less for their account

A major German bank is set to scrap fees on large balances - and a number of others look set to follow. Here's why people in Germany may be paying less for their savings or current account in the near future.

Why German bank customers could soon pay less for their account

What’s going on? 

Interest rates have been at rock-bottom levels for years, making it much harder for people to get returns on their savings.

In recent years, many banks have even been levying what’s known as negative interest rates on customers. If interest normally incentivises people to save by helping them to grow their money, negative interest basically does the opposite.

If you have a certain amount of money in the bank, your bank will charge you negative interest via a deposit holding fee, which will usually be a certain percentage of your balance.

With N26, for example, balances of over €50,000 are subject to a 0.5 percent fee each year. For a balance of exactly €50,000, that equates to €250 in bank charges just for keeping your money there. 

Some banks even charge a deposit holding fee for balances as low as €5,000 or €10,000 in a current account. 

On Tuesday, ING Deutschland became the first bank to announce that it would be scrapping negative interest rates for the vast majority of its customers.

From July 1st, new customers of ING will be able to deposit up to €500,000 in their account without being charged for it, while existing customers will automatically have the fee-free amount raised to €500,000 from the current €50,000. 

Now, it seems a number of other German banks are planning similar moves. 

Why is ING Deutschland ending the holding fee?

Not entirely out of the goodness of its own heart – though that doesn’t stop it being good news for customers.

The European Central Bank (ECB) is set to make a decision on interest rates in the bloc this July, and most people expect that the bank is poised to increase interest rates from minus 0.5 percent to zero. 

Since banks have basically been passing on the ECB’s fees to their own customers, a hike in the ECB’s interest rate would spell the end of most negative interest-rate accounts in any case. But ING Deutschland said it wanted to pass on the positive interest rate trend to its customers even earlier.

READ ALSO: EXPLAINED: How to save money on your taxes in Germany

“With the increase in the fee-free allowance for credit balances on the current and extra accounts, the deposit fee is no longer applicable for 99.9 percent of our customers,” said Nick Jue, chief executive officer of ING in Germany. “We were one of the last banks to introduce a deposit holding fee and one of the first to virtually abolish it.”

He added that the bank had already kept its promise to abolish the holding fee for almost all customers before the European Central Bank made its decision.

Does this have anything to do with that court decision on bank charges?

That’s definitely a factor. According to a decision in Germany’s Federal Supreme Court last year, credit institutions have to obtain the consent of their customers when making changes to their fees and conditions.

That means that financial institutions have to ask for consent to current fees retrospectively if they don’t want hoards of people trying to claim their money back.

If a customer doesn’t consent to the fees, the bank will usually close that customer’s account.

Man signs a contract

A man in a suit fills in an official form. Photo: picture alliance/dpa/Pixabay | hnw-Gruppe

According to ING Deutschland, the scrapping of negative interest rates on balances up to €500,000 may help to sway those customers who have not yet agreed to the latest terms and conditions – including the deposit holding fee.

Anyone who agrees to the Ts&Cs will automatically be given the higher allowance as of July 1st.

“ING Deutschland expects that the increase in the allowances will convince in particular those customers who have not yet agreed to the General Terms and Conditions including the holding fee, and that the bank will thus terminate fewer customers than last planned,” ING said in a press release. 

READ ALSO:

What other banks are planning to do this?

According to reports in Bild and Bialo, the other banks planning on ending negative interest rates (or raising the threshold for fee-free balances like ING Deutschland has done) include:

  • Deutsche Bank
  • Commerzbank
  • Deutsche Apotheker- und Ärztebank (Apobank)
  • Dortmunder Volksbank
  • Hamburger Sparkasse (Haspa
  • Frankfurter Sparkasse
  • Frankfurter Volksbank
  • Mittelbrandenburgische Sparkasse
  • Nassauische Sparkasse (Naspa)
  • Ostsächsische Sparkasse Dresden
  • Sparda-Bank München
  • Sparda-Bank Südwest
  • Sparda-Bank West
  • Sparkasse Hannover
  • Sparkasse Pforzheim Calw
  • Volksbank Stuttgart

What does this mean for my savings?

There’s good news and bad news.

The good news is that, from July, you’ll no longer have to pay exorbitant charges just to store your money in a safe place – and you won’t be penalised for saving more. The bad news, on the other hand, is that low interest rates aren’t going away anytime soon.

So while you won’t be losing money hand over fist, you won’t be earning much of a return on your savings either.

Banks in Frankfurt

Skyscrapers in the financial district of Frankfurt am Main. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

“If the interest rate environment continues to develop positively, we will also let our customers participate in this development,” said ING Deutschland’s Nick Jue. “However, the low-interest phase will continue for the time being and broadly diversified investments will remain important.”

Getting a securities account where your money is invested is one way to try and grow your savings, as is investing in property.

Of course, people with mortgages and other loans benefit from the low interest rates – which could be why the German property market is currently booming. 

READ ALSO: Five ways Germany’s soaring inflation could affect your life

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