Suspicious lending

Not Licensed to Bank

SPS Bank Screenshot
The website is still up, but it's been banned by German regulators.
  • Why it matters

    Why it matters

    Requiring a banking license allows regulators to keep tab on banks and their balance sheets. Closing those that try to skirt the system is critical to protecting consumers.

  • Facts

    Facts

    • SPS Bank has been offering loans in Germany, demanding high fees in return. Two consumers flagged the bank to an early-warning consumer protection service.
    • Germany’s financial regulator discovered it never had a banking license, and has promptly ordered the bank to shut its doors.
    • Online fraud is expected to cost Germany €2.4 billion this year alone.
  • Audio

    Audio

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That something was fishy should have been clear from the advertising. On its website, SPS Bank was offering Hypthekenkredite – an “o” in the German word for mortgage loans (Hypothekenkredite) would have been helpful.

Now it seems the missing letter was the least of SPS Bank’s problems. Germany’s financial supervisory body BaFin this week essential forced the bank to close its doors.

The reason? SPS, supposedly based in the Netherlands, never actually had a license to operate in Germany.

SPS Bank presents itself as your average German bank. On its website (which is still up) it offers everything from home loans to deposit accounts to investment advice. All at “top conditions” of course. Click on the “about us” link and it will tell you the bank was founded in 2006. Since the financial crisis, it sees its mission as using online-based customer service to restore credibility to a financial sector that has “lost trust.”

Such scams aren’t exactly new. Online fraud is expected to cost Germany €2.4 billion this year alone. With online banking spreading to all corners of the globe, it’s getting easier to engage in financial fraud as well (though there’s at least one recent case of a scam that was actually run from inside a bank branch).

But what Germany is highlighting in this case, at least, is that a new system to protect consumers actually did its job.

The suspicious offer was picked up by the so-called “market guardians,” designed to serve as an early warning system to protect consumers and highlight suspicious operators.

The problem was first flagged by customers. In June, two consumers noticed a suspicious-looking online advertisement of the bank. They were looking for an instant loan of €5,000, but apparently were supposed to transfer €450 in advance to an account in the Netherlands. That made them suspicious.

Participants on other online forums reported similar experiences with SPS.

“Received an SMS yesterday: ‘Dear customer, your application for a loan of €20,000 has been approved,’” one user wrote of their interaction. “I phoned up and received documents by mail. Now they want a €945 administration fee.”

Suspicious customers informed the consumer advice center of eastern state of Saxony. And that is how the suspicious offer was picked up by the so-called “market guardians,” a project created by consumer advice centers across the country, designed to serve as an early warning system to protect consumers and highlight suspicious operators.

When BaFin launched its investigation, it turned out the “bank” had no license to lend money or run deposit accounts in Germany. BaFin promptly prohibited the bank from conducting new business and issued a directive for any existing business to be wound up.

In fact, it’s not clear whether SPS has a license to operate anywhere.

The bank could not be found in the register of the Netherlands financial supervision authority either, yet the bank is still present on the Internet. SPS could not be reached for a comment.

Despite this, the market guardians are chalking this one up as a success.

“The case in point shows that the early warning network of the market guardian works well,” said Carmen Friedrich at the consumer advice center Saxony. The system had put a stop to the business practices of the operator and prevented any damage.
Michael Brächer is a banking and financial reporter for Handelsblatt based in Frankfurt. Christopher Cermak of Handelsblatt Global Edition contributed to this story. To contact the author: braecher@handelsblatt.com 

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