Berlin A few months ago, the financial regulator Bafin tried out an instrument that was new to her: With the anonymous test purchases (mystery shopping) made possible by the legislator, the regulator can check how banks, insurers and other financial service providers treat their customers and whether the investment advice meets the legal requirements. The first test run immediately revealed considerable shortcomings in the banks’ investment advice.
“The test run was certainly not representative, but the result was sobering,” said Christian Bock, head of the Bafin department for consumer protection, the Handelsblatt. In personal union, Bock has been Bafin’s representative for investor and consumer protection since the middle of last year. According to the study, important documents were not handed over in a third of the cases – these were, for example, statements of costs or statements as to whether securities products were suitable for the customer.
“We will take a closer look at the topic in the current year in a large representative mystery shopping campaign,” announced Bock. The instrument offers the Bafin new opportunities to uncover problems and grievances in the financial market.
And they can take on enormous proportions, as the bankruptcy of the financial service provider Wirecard shows. The fact that fraudulent activities by the then Dax 30 group were not uncovered in time was not solely due to the Bafin, but nevertheless shook trust in the financial supervisory authority. In the course of the reform of the financial supervisory authority, which also gave the authority a new boss in Mark Branson, consumer protection was also strengthened.
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The Bafin is not there to enforce individual legal claims. It must have consumer protection in mind as a whole. It is therefore committed to consumers as a whole and tries to track down systematic misconduct.
Harder gait
The fact that the Bafin is now taking a tougher approach in terms of consumer protection is shown by the way it deals with saving on premiums. In June 2021, the Bafin issued a so-called general decree, obliging credit institutions to inform premium savings customers about ineffective interest rate adjustment clauses.
The institutes concerned must explain to the savers whether they have received too little interest as a result of the clauses used, and assure them that the interest will be recalculated. More than 1,100 credit institutions filed an objection. The Bafin plans to decide on the model contradictions in the first quarter.
The Bafin also got involved when the Federal Court of Justice (BGH) made a much-noticed judgment in April 2021. According to this, certain clauses in the general terms and conditions (GTC) of the credit institutions are invalid.
So far, for example, banks have assumed that increases in bank fees will apply unless consumers have expressly rejected them. The BGH sees this so-called fictional consent as an unreasonable disadvantage for consumers. After that, consumers can reclaim fees.
Although there was no general decree as in the case of premium savings, the Bafin formulated “expectations of the entire banking industry”. The institutes should deal with legitimate consumer claims “lawfully, openly, transparently and in a spirit of partnership”.
High risks on the gray capital market
In the past, consumers have lost a lot of money investing in the “grey capital market”, for example if they invested in gold, wood or containers. Investors have lost immense sums with offers from Infinus, S&K, PIM Gold, Prokon or P&R.
The federal government is trying to protect customers more, for example by having a neutral controller monitor the use of funds. It remains to be seen whether that will be enough to ward off the emergence of Ponzi schemes.
The specialist lawyer for banking and capital market law Peter Mattil has a clear opinion: “Since laws and regulations cannot protect inexperienced investors, certain forms of investment that are unsuitable for consumers must be prohibited.”
Formal review of prospectuses
Bock shows the limits of the Bafin here: “There is no product supervision, and we don’t check the business model of the issuers either.” The financial supervisory authority checks the investment prospectus that issuers have to submit.
If significant concerns about investor protection arise during this formal prospectus review, for example in the case of a non-transparent corporate network, “we question that,” says Bock. This has happened in around 50 cases in the past year.
“We can then carry out a product intervention procedure, which can end, for example, in the sale to private investors being prohibited.” But the issuers often do not allow this to happen and withdraw the offer or change it.
The warning against risky and dubious products is one side. On the other hand, the Bafin also wants to strengthen the financial competence of investors. “The consumer should know, for example, that the world of cryptocurrencies is highly speculative,” said Bock. Whether corresponding products are then suitable for the investor, “he must decide according to his own willingness to take risks, but above all he must be well informed”.
The Bafin wants to show a stronger presence in social media. “It doesn’t make much sense if people are tricked into buying something via Twitter and we only have a presence on our own website,” Bock points out.
Two years ago, the “Bürgerbewegung Finanzwende” criticized the staffing of the Bafin in the area of consumer protection. The criticism was that it was an “unloved part-time job”. “The allegation no longer applies. Our tool kit has been expanded, with 190 employees working in eleven departments,” says Bock. “We are very well positioned – and have also become bolder.”
More: Harder, faster, more willing to take risks: How the new boss is turning the Bafin inside out