Some loan providers are evidently not particularly critical when it comes to granting consumer loans. In BaFin’s mystery shopping campaign from late summer 2023, the green light was given to nearly 80 percent of the loan applications, even though half of the mystery shoppers showed poor creditworthiness.

Commissioned by BaFin, mystery shoppers posed as consumers wanting to buy furniture, electronic devices and clothing on credit. The eight providers tested in the campaign included four online and two on-site retailers, together with their respective financing partners; loans for these purchases were also requested directly from two banks. In total, 48 undercover purchases were made (see info box).

Credit assessments often superficial

In approximately one third of the test purchases, no data whatsoever were collected on the consumers’ financial situation. In around two thirds of the cases, consumers were asked to provide this information. However, the data requested were often very superficial, focusing in approximately 70 percent of the cases on the mystery shoppers disposable income, i.e. the part of their income that remains after all cost-of-living expenses have been deducted.

Detailed information on a consumer’s earnings and expenses, such as cost of rent and cost of living, were only requested in half of the loan applications. In only 17 percent of these test purchases did the providers ask for information on other loans that the consumers might already have.

A striking point was that the credit assessments for loans for online purchases were less detailed. Salespersons in stores or bank branches almost always requested information on the customers’ earnings and expenses. Such information was only requested in two of the 24 loan applications made on the internet. On the other hand, information on the customers’ disposable income was requested in nearly half of the online loan applications.

High rate of loans granted

The campaign conducted by BaFin also revealed a higher rejection rate for loans requested by young mystery shoppers (27 percent) compared with those requested by older buyers (10 percent). Moreover, the survey revealed that the rate of loans granted to on-site mystery shoppers was higher (88 percent) than those to online mystery shoppers (71 percent) – although less detailed information on the financial situation of online mystery shoppers was requested, as explained above.

In a number of cases, mystery shoppers were offered loans in higher amounts than had actually been requested.

The mystery shoppers were offered a range of loans to finance their purchases. In most cases, these were traditional consumer loan contracts, i.e. instalment loans or lines of credit, for example on credit cards. (Buy-now-pay-later) were also offered in a few cases.

Room for improvement in the area of documentation and transparency

Before a loan agreement is signed, lenders are required to explain the details of the contract to their borrowers, using the format of the Standard European Consumer Credit Information – SECCI).

Applicants requesting loans using the automatic online procedure were correctly provided with this standard information. In a few cases where loans were applied for on site, this information was not provided at all. In nearly half of all undercover purchases, the standard consumer credit information was handed out too late, i.e. after the contracts had been signed.

More than half of mystery shoppers dissatisfied

The mystery shoppers were also instructed to check whether there were any advertisements for the loans they had taken out. Around one third of the mystery shoppers, all of whom were on-site buyers, noticed advertisements for their particular loan, e.g. zero percent loans advertised via stand-up displays or posters.

On a positive note, the interest rates and terms for most of the loans taken out were the same as those promised in the advertisements. In only a few cases did the advertisements fail to point out that the favourable terms were conditional on credit ratings for example, or were tied to a specific term. In these cases, the mystery shoppers were granted other conditions than those advertised.

More than half of the mystery shoppers felt that they were insufficiently informed about their loan. They were particularly critical about the failure on the part of the advisors to explain all the key features of the product or to request detailed information on their personal situation. The mystery shoppers felt that the advisors acted uncertain or were too hasty in concluding the consultations.

Only one third of the on-site mystery shoppers were satisfied with the advice they received. In contrast, more than half of the online mystery shoppers expressed satisfaction with the advice they were given. However, some mystery shoppers who applied for loans online experienced difficulties with the application process, such as connections being interrupted, information having to be entered several times and problems with the video identification process.

What BaFin is doing with the results

BaFin is using the results of the mystery shopping exercise to examine whether the institutions violate consumer protection rules when marketing the loans being tested. These could be violations of documentation and transparency rules or those governing loan applications made in writing. If irregularities are discovered, BaFin will call on the institutions to comply with the requirements and will adopt measures as required.