Germany’s law requiring banks to open a bank account for everyone, passed two years ago in line with an EU directive, is still being resisted by banks. They demand high fees for what they call a “basic” bank account in order to cover costs and discourage applicants.
“Banks are not permitted to ask fees that fend off customers,” Béatrice Freiwald, executive director at financial regulator Bafin, said recently. The Bonn-based agency has gone to bat for consumers who complain about exorbitant fees for the legally mandated accounts.
A German court recently ruled against Deutsche Bank for its high fees on the accounts, although Germany’s largest bank has appealed. The court found the fee of €8.99 a month was twice as high as similar accounts at the bank. It is also much higher than that of competitors. The average fee charged for basic bank accounts is €6.45 according to a survey of 32 banks. Deutsche Bank’s subsidiary Postbank is also facing a legal challenge of its fees with a hearing due next month.
Banking the unbanked
The law’s objective was to make it possible for residents in the country, including the homeless and immigrants, to get a bank account so they could make payments without using cash. Germany historically has relied on bank debits and transfers to pay bills and collect salaries rather than checks or credit cards.
While good for consumers, the law added disproportionately to banks’ costs because these customers are unlikely to sign up for additional services. For starters, the basic accounts don’t come with overdrafts, a lucrative source of interest income for banks on regular accounts.
The court ruling in the Deutsche Bank case did not question the rights of banks to at least cover costs with the fees. On the other hand, the law specifies that fees must be “appropriate,” and that is harder to pin down.
Only direct banks that execute transactions exclusively over the internet offer the accounts for free, a Handelsblatt survey found. Sparda-Bank, for instance, charges only €5 a year for the debit card associated with the account.
But the criticism from regulators, consumer groups, and Stiftung Warentest — Germany’s version of Consumer Reports — has begun to have an effect. Banks are adjusting the fees downward, often to the same level as available online. One bank abandoned its policy of charging an extra €39 to open the account, on top of the monthly fee.
Stefan Reccius is a trainee at Handelsblatt and Sheera Plawner is an intern. Darrell Delamaide adapted this article into English for Handelsblatt Global. To contact the author: email@example.com.