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Banking district in Frankfurt am Main: good deals with negative interest rates?
Photo: Boris Roessler / dpa
The Volksbank Rhein-Lippe is not one of the really big cooperative banks.
But these days, she's made headlines nationwide.
She just wanted to be left alone.
But now she has to deal with a lawsuit brought by the Federation of Consumer Organizations (VZBV).
And rightly so, I think.
The lawsuit
The comrades from the Lower Rhine had decided in spring 2020 to levy a custody fee on new customers with a checking account of EUR 10,000 or more.
This makes it one of the banks that very quickly charge negative interest for new customers.
Negative interest, which is not allowed, as the Düsseldorf Regional Court ruled in the first instance at the end of January.
The bank's condemned account model is not cheap anyway.
The Volksbank Rhein-Lippe charges a basic fee of 10.90 euros for its »VR comfort account« per month.
And an overdraft rate of more than 12 percent.
Bank boss Ulf Lange openly admits that the model with the 10,000 euros was primarily intended to "deter" new customers who only wanted to park money at the Volksbank.
And that was also successful.
There are therefore “practically no customers” who are affected by the verdict.
Economically, the bank's custody fee number hasn't brought in much, nor should it.
But according to Lange, it has already helped against the current "liquidity glut".
Volatile money that wealthy private customers or companies want to park as new customers cannot be used.
Or as it said in the lecture at the Düsseldorf Regional Court: "The advantages of a credit institution for sight deposits are ... small."
In other words, the Volksbank interprets the current account as a kind of safe deposit box, for which the customer has to pay a custody fee in addition to the 10.90 euros per month for deposits of more than 10,000 euros.
The custody fee was so offensive that the VZBV first warned the Volksbank a year and a half ago and then sued.
The bank should refund customers and release customers' names to a trustee to ensure everyone gets their money back.
What is actually happening there?
You have to explain it carefully, as they would say on the Lower Rhine.
Imagine you have opened such an account, sometimes you have a plus of 8,000 euros, sometimes 16,000.
You don't want to pay thousands of euros into a money market account at another bank because there would be no interest there either and you don't see why you should open another bank account.
So on average you are more than free in the plus with 2000 euros and are estimated to pay around 10 euros in negative interest over the year.
So nothing that makes you poor.
More of a fundamental annoyance, a question of principle.
From the Volksbank's point of view, the custody fees are above all a successful control element.
Private bank customers in this country either find a bank with negative interest rates stupid and stay away – or they are not put off by it.
Under no circumstances does he run to court for 10 euros.
These are the experiences of the bankers.
In terms of everyday life, as a customer, you can also see it quite differently.
If I give my money to the bank in a checking account, I not only use the account to process my payments, I also give the bank a loan in the amount of my credit balance - with the aim of the bank passing this money on to people who are currently need a loan.
And then we share the profit.
It's the same the other way around.
If I go to the overdraft facility and borrow money from the bank, I can't charge the bank because I'm taking the annoying money for a few months - at least not so far
If I just wanted my money safe I would put my money in the safe deposit box at the bank.
It is at least supposedly safe in the locker (except for inflation).
The bank gets a fee for using the safe and I don't need to buy a safe.
The judgment
The consumer association VZBV argues at the district court of Düsseldorf in a conservative and system-preserving manner: The current account is not a safe deposit box, but primarily there for payment transactions.
And the customer has already paid a basic fee for this.
Additional fees for the same purpose are therefore illegal.
In the specific case, the VZBV also successfully argued in the first instance.
The decisive sentence of the judgment at the regional court: »According to the law, there is no right to payment of a custody fee in addition to an account management fee.« (Az. 12 O 34/21, judgment as PDF)
The Düsseldorf Regional Court also held that holding a certain sum of money in the account is part of the core of the current account service and therefore cannot be priced separately again.
There is no apparent reason why banks could "pass this part of their business risk on to customers in the form of a custody fee".
The Düsseldorf judges are moving in the same direction as the Berlin Regional Court months earlier.
In October, the Spardabank Berlin had forbidden its custody fee on the grounds that the additional fee was “not compatible with the essential basic ideas of the legal regulation” (Az. 16 O 43/21).
The consumer is “unreasonably disadvantaged”.
But not all courts see it that way.
The Regional Court of Leipzig had ruled in July that such custody fees could be permissible if the corresponding written consent was given by the customer (Az. 5 O 640/20).
With such a constellation, customers can safely assume that the dispute will go to the Federal Court of Justice and will last for years.
The Volksbank Rhein-Lippe has already announced that it will appeal.
Also the VZBV.
Years of exemplary litigation, which means that in the end hundreds of thousands of customers at many hundreds of banks get a little bit of money ripped off every year.
Unless they fight back individually.
It doesn't matter whether the individual bank only wanted to scare off rich people who come with too much money.
Why is the conflict actually necessary?
In fact, the banks have problems when interest rates are low.
It is no longer so easy to make money with the interest margin.
In the monthly report for September 2021, the Bundesbank wrote that this interest rate margin had fallen below one percent for the first time.
New customers can think: If the bank gives me the finger as a greeting, does that attract me?
However, the negative interest risk of the banks at the European Central Bank (ECB) is nowhere near as great as has always been lamented.
The banks in Germany are said to have paid a total of around four billion euros in negative interest to the ECB in 2021, but at the same time the ECB offered the banks lucrative interest deals, with which many banks often raked in interest profits of more than 100 million euros.
The well-known bank newsletter "Finanz-Scene" finds that the ECB's support mechanism for the banks is "still cautiously described with the keyword subsidies".
And speaks more simply of »ECB doping«.
In addition, there is the income from the banks' negative interest business model, which the "financial scene" often considers higher than the money that these banks have to pay the ECB.
And now?
Now we come to the tricky problem of what the customer can do if his bank comes up with such ideas.
For existing customers, the problem is often not yet acute, as in the case of Volksbank Rhein-Lippe, for example.
The regulation should only apply to new customers since April 2020.
Existing customers were also approached, the bank informed the Düsseldorf Regional Court, but those who did not want to do so did not have to pay any custody fees.
And this week I was verbally told, "They shouldn't be deterred at all."
Other banks are much more energetic.
For example, ING, Postbank, Deutsche Bank, Comdirect also write to existing customers.
The Stadtsparkasse Düsseldorf even kicked out 24 recalcitrant customers with particularly high balances who did not want to sign an agreement and terminated the accounts.
So if you don't want to sign such an approval from the bank, you risk being kicked out.
New customers can think: If the bank gives me the finger as a greeting, does that attract me?
Rather not.
There are still enough banks nationwide that run the checking account free of charge and who only charge the dubious custody fees, if at all, for significantly higher sums.
First you go there.
Checking accounts or call money accounts are really unsuitable for longer parking of higher sums.
My example: If I had 50,000 euros in such an account and the house bank threatened me with a custody fee from 10,000 euros, I should consider two things.
In this case, the custody fee is estimated to be around 200 euros a year, which is quite a lot of money.
But it is worse: The entire 50,000 euros in the account currently lose at least 1,500 euros in purchasing power over the year due to inflation, which is currently more than three percent a year.
That is my actual economic risk.
And that's why I shouldn't leave this money lying around and - especially if I don't want to spend it in the long term - invest it in a form that promises a realistic chance of a better return in the long term.
more on the subject
Nine tips for beginners: How to get involved in the stock market with ETFs – with little riskBy Udo Trichtl
So as a cautious investor, for example, 20,000 euros in a fixed-term deposit account with a small but positive interest rate, and 20,000 euros in an ETF.
Or braver.
The distribution depends on your risk tolerance, if you have strong nerves and staying power, you can and should definitely choose a higher proportion of shares and put the 40,000 euros in an ETF.
Or still invest in real estate.
They are also significantly cheaper on the Lower Rhine than in Berlin, Munich or Hamburg.
And what should the bank do?
It should make this connection clear to customers and guide them not to let the value of their money go to waste.
The Volksbank told the court that they did.
However, she apparently considers her new customers to be resistant to advice.
Transparency note: I was born and grew up on the Lower Rhine, have had accounts with the Volksbank Rhein-Lippe for more than 50 years, and have also been a member for a few years. However, I am practically not (yet) affected by the custody fee rule.
