The EU wants to pass a new directive to protect consumers with consumer credit, and Germany of all countries now wants to prevent that. What sounds crazy is currently the case in Brussels, unfortunately. A high-ranking representative of the German federal government in Brussels recently confirmed it at a public event. “The most important concern of the federal government,” he said, “is of course the end of the perpetual right of withdrawal.”
In plain language, this means that consumer protection is not the most important concern, nor is it the simplification of complex credit agreements or the protection of ignorant borrowers. no For Germany, the most important concern is to abolish a law that protects German debtors from over-indebtedness and personal bankruptcy, because the German state and financial regulators cannot do it.
Germany’s positioning is an embarrassing signal that shows ignorance about the living situation of normal people and, on top of that, undermines consumer protection. Instead of curtailing the rights of German citizens, Germany should rather advocate strengthening consumer rights and, of course, stricter regulation of the banking market. This is the only way it can reasonably protect people from financial institutions that drive people into over-indebtedness with windy tricks.
Bad loans can lead to bankruptcy
Not every bank behaves this way. Not every bank has bad intentions when it gives people a loan. That is clear. But obviously there are enough. In Germany, more than six million people are overindebted, according to estimates by experts, several hundred thousand people in Germany are in so-called chain loans. With such loans, a bank advisor summons the consumer to the bank every few years for an interview, and in the end they go home with a new contract, higher interest rates and an additional product. This often leads to bankruptcy.
The EU wanted to stop this dubious behavior with a new directive. As long as she cannot or does not want to, she should at least keep the last emergency exit open for people in such situations: the eternal right of withdrawal. This emergency exit is unknown to many who have never been in debt. And if you don’t know him: lucky. In principle, the perpetual right of withdrawal means that consumers can withdraw from a credit agreement at any time and without notice if the bank has not informed them sufficiently or if mandatory information is missing. Banks and the federal government dislike this.
On the one hand, the latter argues that the courts are overflowing because consumers are constantly revoking contracts in order to get cheaper interest rates, but they cannot back this up with figures. On the other hand, she argues that the abolition would finally give consumers legal certainty. Again, this statement is hypocritical. Because an abolition would not create security for consumers, but would support the unfair business practices of banks.
The European Court of Justice recently supported the rights of consumers
In any case, banks are in a stronger position compared to consumers: the contracts are complex, the customers are not experts in credit and often also depend on the money from the bank. If this money house now fails to issue the contracts properly, there must be a lever for consumers to defend themselves against it, and that is exactly what the eternal revocation does. The European Court of Justice confirmed this last year. The signal was clear: consumers must be able to defend themselves against the banks’ mistakes. Abolishing the perpetual revocation would thus contradict the judgment from Strasbourg.
So what should the federal government do? In principle it is very simple. Instead of curtailing consumer rights, she should rather advocate stricter regulation: make contracts simpler, control advice better, ban scams like chain loans and big commissions for additional products. There is certainly no shortage of consumer credit abuses, if you ask consumer advocates. The federal government would just have to make consumers the “most important concern”.
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