Case #1
SEPA discrimination

The complaint

Several customers complained to BaFin about a number of credit institutions that did not accept accounts with a non-German IBAN (International Bank Account Number) for collecting direct debits. The complaints related to debits for investment and loan products. For example, the customers were unable to arrange for loan instalments to be debited to their account with a non-German IBAN.

The problem

The banks concerned did not fully implement EU Regulation No. 260/2012 of the European Parliament and of the Council of 14 March 2012. The general terms and conditions of several banks stipulated that only German bank accounts could be used as a reference account. In some online templates, the banks had already preset the country code “DE” in the text field for the IBAN of the payer (debtor). Customers were unable to modify this default setting, with the result that only a German IBAN could be entered online.

The solution

The banks modified their processes after being informed by BaFin about this irregularity, and they now also allow non-German IBANs to be used. In some cases, however, technical implementation has not been completed. In these cases, the credit institutions have promised to allow their customers to store a non-German IBAN manually.

Legal background

The goal of the SEPA (Single Euro Payments Area) project is to remove barriers to cross-border cashless payments in the euro area in order to ensure the proper functioning of the internal market. It enables domestic and cross-border SEPA payments to be made under the same conditions and in accordance with the same rights and obligations. Under Article 9(2) of EU Regulation 260/2012, a payee accepting a credit transfer or using a direct debit to collect funds from a payer holding a payment account located within the Union is not allowed to specify the member state in which that payment account is to be located, provided that the payment account is reachable in accordance with Article 3. This means that an undertaking using direct debits to collect claims may not restrict this procedure to payment accounts from a particular member state. Rather, it must allow direct debits from all payment accounts in the EU that are reachable using the SEPA direct debit scheme. This also applies to payment accounts in Iceland, Liechtenstein and Norway.

The credit institutions concerned gave a number of reasons why they did not allow non-German bank accounts to be used for collecting direct debits. For example, there were differing legal positions about the scope of the relevant legislation, and in some cases banks claimed that technical reasons prevented them from doing so.

Case #2
Exchange rate on the account statement

The complaint

A consumer complained about contradictory information on a number of account statements. The consumer was unable to reconcile the calculations applied to several debit entries to their account for credit card payments abroad in foreign currency. The amount actually debited was not equal to the foreign currency amount multiplied by the exchange rate given. To document the complaint, the customer sent corresponding account statements to BaFin.

The problem

BaFin’s examination revealed that the customer’s objection was justified. BaFin was unable to verify the calculations underlying the information on the account statements for credit card payments in various currencies. The credit institution told BaFin that the transactions had been correctly calculated, but that the exchange rate given on the account statements was wrong. It stated that the exchange rate used was shown to only two decimal places, rather than four, with the missing decimal places replaced by the number zero. It claimed that this was in line with standard practice at the bank – not just in respect of the complainant, but for all foreign currency settlements.

The solution

Prompted by BaFin, the bank changed the way it presents exchange rates and now shows the correct exchange rate on its account statements. Consumers can therefore understand how foreign currency amounts are translated.

Legal background

Under Article 248 section 7 of the Introductory Act to the Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuch – EGBGB), the payment service provider must inform its customer, among other things, about the exchange rate that the payer’s payment service provider uses for the payment transaction and about the amount of the payment transaction after application of this foreign currency translation. A consequence of this is that the bank, as a payment service provider, must tell the complainant, as the payer, about the correct exchange rate. At BaFin’s insistence, the credit institution hunted for the source of the error in its IT system in what turned out to be an extensive process. It has now implemented the necessary technical conditions for ensuring the accurate, and hence correct, presentation of exchange rates.

Case #3
Transferring securities and portfolios from one institution to another

The complaint

An unusually high number of complaints referred to customer instructions to transfer securities and portfolios from one bank to another. Either the institution concerned significantly delayed the transfers, or implementation of the transfers was unsatisfactory. The delivery routes may differ considerably, depending on the type of security and the depositories involved. The reason is that securities held for safekeeping in a custody account do not necessarily have to be recorded at a single depository. In some cases, they may be held at multiple depositories. The latter case may apply if a customer has both German and non-German securities in their portfolio. In particular if non-German securities held at depositories outside Germany are being transferred, it may well take several weeks overall to transfer the portfolio. Manual input processes may also be necessary if securities are held outside Germany.

The problem

If transferring the portfolio is taking too long, this may indeed cause problems for customers, because investors cannot access their securities while they are being transferred, meaning that they cannot be sold during this time. For example, investors cannot react to collapsing prices or realise profits during this period.

The solution

BaFin asked the institution in question to comment on the facts of the matter. Management stated that it had instituted measures to ensure the rapid processing of outstanding securities transfers. BaFin is closely tracking the implementation of these measures as part of its operational supervision.

Legal background

In organisational terms, section 63 (1) of the Securities Trading Act (Wertpapierhandelsgesetz) requires institutions to provide the safe custody business honestly, fairly and professionally in accordance with the best interests of their clients. In addition, under section 80 (1) of the WpHG, institutions must take appropriate steps to ensure continuity and regularity in the performance of investment and ancillary services. Moreover, customers also have the right under civil law to demand the surrender of securities held by the institution in safekeeping.

Case #4
Wrongful advice provided to an elderly customer

The complaint

An 89 year-old customer complained that his bank recommended a one-time investment in an investment fund designed for investors with a long-term investment strategy as well as a savings plan in the same investment fund. His income hardly sufficed to fund the monthly savings amount because he regularly had to pay healthcare costs from the income due to his age.

The problem

Although the customer only had a monthly budget surplus of €200, the investment adviser advised him to put €250 per month into the savings plan. The recommended one-time investment covered all cash funds held in custody at the advising bank; the institution did not have any detailed information about other assets held by the customer at other banks.

The solution

The bank pointed out that, according to the information obtained from the customer, the assets invested with it were not designated to cover cost-of-living expenses but, during the course of the complaints process, it made an offer to the complainant to reverse both the one-time investment and the savings amounts paid up to that point. The bank also introduced an automatic check whether recommended savings amounts can be supported by its customers’ available cash funds.

Legal background

Older customers can also follow long-term investment objectives, for example if they make investments in their lifetime which they subsequently want to pass to their heirs. However, if the bank recommends an investment to its customer, it must consider the customer’s financial capacity, taking into account his investment objectives. The bank and the customer should ensure that future liquidity requirements, which may also be uncertain, are reflected in the investment objectives.

Case #5
Riester pension: Choice between annuity and a lump-sum payment

The complaint

A customer received a letter from her life insurance undertaking a few weeks before her Riester pension product was due to mature. It told her that the accumulated capital would be paid out to her in a lump-sum amount. The customer complained to BaFin that the insurer did not give her a choice between a monthly annuity, which was her preference, and payment of the policy account value.

The problem

The letter from the insurer came as a surprise for the customer. She said that the insurer had told her regularly for many years about the amount of the monthly annuity she could expect. There had been no mention of any lump-sum payment. In fact, the customer did have a contractual option to choose between the lump-sum payment or monthly annuities.

The solution

After BaFin had written to the insurer, it informed its customer about the amount of the monthly annuity that she had chosen. Additionally, BaFin ensured that in future, the insurer would draw attention to this option in its settlement letter to all of its customers.

Legal background

For Riester pension products, the Act Governing the Certification of Contracts for Retirement Provision and Basic Pension Contracts (Gesetz über die Zertifizierung von Altersvorsorge- und Basisrentenverträgen – AltZertG) generally provides for lifelong annuity payments to the policyholder at the start of the payout phase. However, the insurer and the customer can also agree a different procedure: policyholders with a “small Riester pension”, in other words a monthly pension not exceeding a certain amount (2019: €31.15 in Western Germany, €28.70 in the former GDR), can also receive a settlement in the form of a lump-sum payment, without having to repay state subsidies and tax incentives. If – like in this case – an option was agreed, the customer is able to choose between a one-time payment or monthly annuity payments.

Case #6
Premium direct debits for life insurance policies

The complaint

A married couple had six insurance contracts with an insurer. Although the monthly premiums had been debited to their current account for many years through six separate direct debits, this suddenly changed to a single direct debit. The couple complained that they had been surprised by this change.

The problem

The customers were no longer able to break down the individual premiums for their insurance contracts combined in the single direct debit.

The solution

After BaFin had told the undertaking about several complaints like this, it started informing its customers about the single direct debit and the breakdown of the amount, provided that more than three contracts were affected. Almost 400 customers ultimately benefited from this change.

Legal background

Insurance contracts require the insurers to tell their customers at least about major changes in the administration of their policies.