Frankfurt The most valuable German fintech is threatened with new trouble: customers are outraged because their N26 account was abruptly terminated. No transfers, no cash withdrawals: the Handelsblatt is aware of dozens of cases in which customers have not had access to their accounts since last Thursday.
Several customers from Germany and abroad have received the same letter from the online bank, which states: N26 has found a violation of the general terms and conditions on the account in question. “We therefore declare the extraordinary termination of your N26 account.”
The notice is given in accordance with the “basic rules for the relationship between customer and bank”. The termination takes effect immediately.
Niels Nauhauser from the Baden-Württemberg consumer advice center criticizes: “In the letter of termination, N26 refers to a violation of general terms and conditions, but does not provide information about which specific violation the customer is accused of.”
Termination without notice in accordance with the stated terms and conditions is only possible for good cause. “In the event of a breach of contract, the bank must give its customers a period of time to remedy the situation in accordance with their own terms and conditions,” said Nauhauser.
In fact, the bank’s terms and conditions contain a 14-page document on the subject of “Basic rules for the relationship between the customer and the bank”. According to this, termination “for good cause without observing a period of notice” is only permissible for three reasons: if the customer has provided incorrect information about his financial situation, if a significant deterioration in his financial situation occurs or threatens to occur, or if the customer fulfills his obligation to order or strengthen his position of collateral within the reasonable period set by the bank.
Among those affected is Alex K.*. He has been a customer of N26 for a year and a half. On Thursday morning he bought a sandwich with his account, he reports. In the afternoon he could no longer access his account.
Proof of origin of funds requested
Some customers who were still able to log into their account even say that N26 withdrew the entire amount from the account. This is also the case with Lars P.*. On Friday all his money was from N26 been debited from his account. Today he then received a message from the smartphone bank: his current balance is not sufficient to cover the pending debit.
Of course, P. has to continue paying his running costs, but there is no more money in his account due to the N26 debit. If the transaction is declined, he will be charged a fee, the N26 message said. And if the account then falls into the red, overdraft interest would also be due. Where exactly the debited money was transferred to is unclear.
At the request of the Handelsblatt, N26 said: “Occasionally we have to freeze or close accounts if we detect unusual activity or our terms and conditions are violated. They could not comment on the specific reasons behind the closures. However, on the rare occasions that they close accounts, they would notify the respective customers directly. Only very few accounts are affected, said the smartphone bank.
In its letter to at least some customers, the neobank also states that it is currently not possible to pay out the remaining account balance. “Please send us proof of the origin of the funds in the form of appropriate documents.” The bank will then “check again” the payment of the remaining balance.
The wording suggests that the mass layoffs are related to N26’s attempt to install better money laundering controls. This is because proof of the origin of money is usually required in connection with money laundering and fraudulent account activity.
“The identical point in time, the accumulation of cases, even among some long-term customer relationships, indicate that the termination action is not due to a routine review,” says Nauhauser.
Bafin takes N26 on a short leash
Over the past two years, N26 has apparently had massive problems with accounts that criminals could use to smuggle their illegally obtained funds abroad. Last summer, the Handelsblatt reported on a list of almost 1,600 neobank accounts that were opened between May 2019 and July 2021 and were apparently used for fake shops or fraudulent Ebay accounts on the Internet. Apparently, N26 struggled for a long time to correctly identify new customers.
The German financial regulator Bafin then capped the growth of new customers at N26, and the Italian regulator even stopped new customers in March. These restrictions will only be relaxed when the fintech can demonstrate progress in preventing money laundering.
N26 is thus under pressure to quickly resolve its regulatory issues in order to grow again. In recent months, the company had invested heavily in better security processes and hired staff for them.
The wording from the customer letter could be an indication that N26 is now searching its customer base very extensively for potentially suspicious accounts in order to solve its problems and would rather give too many notices.
“We advise those affected to ask the bank to state the specific basis for the claim for the termination and the alleged breach of duty,” says Nauhauser. If the termination turns out to be unjustified, there may even be claims for damages. In this case, those affected should document the damage caused, says Nauhauser.
More: Italy’s financial regulator imposes a freeze on new customers for N26