Why German banks are getting more customer complaints than ever

According to the Federal Financial Supervisory Authority, there's been drastic loss of trust in banks and other financial institutions in Germany lately.

Last year, the watchdog received around 15,000 complaints from German banking customers - 20 percent more than the previous year.

The stats, which were obtained by news agency Reuters, were also backed up by reports from consumer advocates, who said they had experienced a steep rise in customer enquiries and uncertainty.

"The mere fact that consumers are asking us more and more and seeking our advice is proof enough that they do not fully trust the institutions," Niels Nauhauser, an expert on banks at the consumer advice centre in Stuttgart told Tagesschau. 

While many of the most recent enquiries were related to the turmoil in the banking sector after the near collapse of Credit Suisse, experts believe the figures reveal a more enduring pattern of customers losing faith in financial institutions.

READ ALSO: EXPLAINED: How America's banking crisis could hit consumers in Germany

A survey by consultancy firm EY, for example, found that 31 percent of Germans had little or no trust at all in the finance industry. So what's behind this drastic loss of confidence? 

It all seems to relate to a lack of transparency on the part of the banks - and the aftermath of a landmark court ruling from 2021. 

Court ruling on bank fees

Back in 2021, Germany's Federal Court of Justice (BGH) delivered a severe blow to the nation's banks. In a dispute involving Postbank, the court found that banks needed to obtain the explicit consent of customers when adjusting their fees or terms and conditions.

Until then, many banks in Germany had inserted clauses into contract changes that assumed the customers' consent if they didn't submit a written objection. Following the BGH ruling, these clauses became invalid overnight.

Worse still for the banks, it opened up avenues for customers to reclaim fees that they had been charged without their consent. People who had opened accounts without fees and subsequently been charged were able to challenge their bank and get refunds on any fees charged since 2018. 

This sparked a race against time on the part of the banks to try and gain explicit consent from all their customers on their terms and conditions. But banks have had an uphill struggle getting this consent from the some 110 million account holders in Germany. 

In some cases, the institutions have even resorted to drastic measures like threatening to close customer accounts, while others have sent repeated reminders and requests to their customers.

However, there's still a strong sense that banks have been underhanded when adjusting their terms and conditions - and often stealthily adjust them to their own advantage. 

READ ALSO: Why a German court decision means you could be entitled to compensation from your bank

Endless changes to T&Cs 

A year after the court ruling - in April 2022 - the controversy on terms and conditions continued to rage in Germany. 

Last year, the Federation of German Consumer Organizations (VZBV) filed claims against two savings banks on behalf of several hundred consumers, who complain that the banks continued to increase fees even after the BHG decision.

VZBV said consumer centres had received at least 3,200 complaints between June 2021 and February 2022 and a further 4,600 consumers had sought advice from experts.

More recently, consumer protection activists have been battling banks in the courts - and have won several cases - over what they see as unfair tweaks to customer contracts.

These include sudden hikes in interest rates on premium savings accounts, changes in business terms and conditions that were made without the consent of the customers and hard-to-understand promises about 'sustainable' investments.

READ ALSO: German banks accused of charging 'illegal' fees to customers

'Differences of opinion'

Speaking to Tagesschau on Thursday, lobbyists in the banking sector defended themselves against accusations that customers were rapidly losing trust in financial institutions. 

A spokesperson for Deutsche Kreditwirtschaft claimed that the uncertainty had much more to do with the fact that banks have faced turbulence recently - but that the sector remained robust and stable in spite of this.

"It is quite normal that in an industry that offers mass services, there are differences of opinion between customers and banks," they added.

But customer rights advocates responded sceptically to the claim that banks shared no blame in the recent spate of complaints.

Beyond the uncertain financial outlook, the recent crisis of trust is due to the fact that the industry has repeatedly adjusted the terms and conditions in its favour, Sascha Straub, head of the department for financial issues at the Bavarian Consumer Advice Centre, told Tagesschau.

Vocabulary

complaint - (die) Beschwerde 

crisis of trust - (die) Vertrauenskrise 

increase - zunehmen / steigen 

to threaten - bedrohen