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Why a German court decision means you could be entitled to compensation from your bank

Germany’s federal high court has ruled that the Postbank is not allowed to raise fees without the explicit consent of a customer. The ruling is likely to have consequences for almost all German banks. Here’s how you can benefit from it.

Published: 2 May 2021 12:32 CEST
Updated: 2 May 2021 14:36 CEST
Why a German court decision means you could be entitled to compensation from your bank
Postbank. credit: dpa-Zentralbild | Jens Kalaene

The federal High Court (BGH) announced on Tuesday that it was not permissible for Postbank to change its terms and conditions based on a clause which stated that the customer’s consent would be assumed unless they expressly rejected the new terms.

The BGH ruled that “clauses in a bank’s general terms and conditions are invalid that assume the customer’s consent to changes in the general terms and conditions.”

The national consumer rights organization (VZBZ) had taken the bank to court because of the clause.

Postbank is far from the only bank to have such a clause, according to Der Spiegel. Most German banks have either exactly the same clause or one that has the same effect.

The clauses have been used by banks to increase account fees without expressly gaining the consent of the customer.

The ruling, coming from the country’s highest court, will have a wider impact than simply on this specific case.

According to the website finanztip.de customers can now reclaim all bank fees that have been introduced without the express consent of the customer since the start of 2018.

In other words, if you opened a bank account without having to pay fees for it and the bank subsequently started charging fees, you are likely to be entitled to compensation. The only circumstances under which you are not entitled to such compensation are when you signed a document giving your express consent to the new fees.

Finanztip has created a model letter (in German) that you can use to claim the wrongly charged expenses from your bank. They also say that you are entitled to charge interest on the fees.

According to Der Spiegel, two things are likely to happen when you request repayment from the bank.

Either the bank will say that it was surprised by the decision but will immediately consent to the repayment. It will then inform you of new fees to be paid on your account and ask you to sign a consent form, stating that your account will be cancelled if you do not do so.

You can either sign the form or look for a cheaper account elsewhere.

It is also possible that the bank will claim that the ruling does not cover the specific fees that were charged on your bank account.

In this case you can contact the bank ombudsman and request that they pursue the case for you. There are no costs involved in recruiting the services of the ombudsman.

SEE ALSO: How post-Brexit bank changes could affect British people in Germany

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BANKING

Card over cash? Why Germany is seeing a new payment preference

Cash has long been king in Germany, with many smaller retailers refusing to join the rest of the world in adopting contactless payment systems. But card-based payments are on the rise, as recent stats about Girocard use reveal.

Published: 13 February 2024 12:31 CET
Card over cash? Why Germany is seeing a new payment preference

Germany has long been a very cash-based country, occasionally to the dismay of frustrated tourists at the Döner shop.

A few German phrases express the people’s love of physical money. There’s ‘only cash is true’ – Nur Bares ist Wahres. Or Bargeld lacht, literally meaning cash laughs, but used to imply that cash is what’s wanted, similar to ‘cash is king’ in English.

But the classic German preference for cash appears to be evolving, as the use of girocards is growing, even for small transactions.

How are girocards being used?

Girocard, an ATM and debit card service offered by German Banks, was designed to allow customers to use virtually all German ATMs and, increasingly, to make purchases at businesses.

READ ALSO: Ask an expert – Why is cash still so popular in Germany, and is it changing?

Last year, consumers in Germany used their Girocard more often than ever before for cashless payments. A total of €7.48 billion payment transactions with the plastic card were counted – 11.5 percent more than in the previous record year 2022, according to figures published by the Frankfurt-based institution Euro Card Systems.

Whether at the bakery, petrol station or supermarket, customers are increasingly pulling out their cards at the checkout, even for smaller amounts. As a result, the average amount paid with the Girocard fell from €42.34 to €40.69 within a year. 

The rise of card payments in Germany

Contactless payment, which is possible with girocards and credit cards that have an NFC chip, got a boost during the Covid pandemic, as retailers promoted it for hygiene reasons. 

But the use of card payments has continued to grow in Germany since then, boosted partly by the increasing use of girocards.

Promoting the use of girocards, some German banks have expanded their cards’ functions: Sparkassen, Volksbanken, or Raiffeisenbanken offer girocards for the digital wallet, for example.

Banks want to continue upgrading the payment card with further applications. For example, a project is being tested which would add an age verification function to girocards that would be useful when a customer is buying cigarettes.

On the retail side, it’s clear why the Girocard is preferred to other debit options.

“We see that debit cards from international providers cost up to four times more,” Ulrich Binnebößel, Head of the Payment Systems & Logistics Department at the German Retail Association (HDE) told DPA.

What’s the difference between the Girocard and other debit?

The Girocard is a strictly German phenomenon. It can be seen as the latest iteration of the EC card, which was created to consolidate payment systems following the unification of former East and West Germany.

In 1991 different debit card systems, including Eurocheque guarantee cards from former West Germany and Geldkarte ATMs from former East Germany, were unified into Eurocheque cards.

Then in 2001, the Eurocheque system was disbanded, but German banks continued to use the EC logo for “electronic cash’” cards, or EC cards. In 2007, the German Banking Industry Committee introduced Girocard as a common name for electronic cash and the German ATM network.

Girocards are only issued and accepted in Germany, so if you want to get one of your own, you’ll have to join a German bank, and shell out those notorious German banking fees.

READ ALSO: Why it’s almost impossible to find a free bank account in Germany

Alternatively, you can get by with internationally accepted debit cards provided by a bank in your home country, or otherwise by joining an app-based European banking service like N26. 

But be warned, without the Girocard in hand, at some smaller retailers you may be told, “Leider nur Bargeld oder EC-Karte.”

With reporting by DPA

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