Building societies and their fees – what can you ask for?
Karlsruhe – Loan fee, closing fee, account fee: These additional income are important for building societies. But now they have to explain in court why they charge these fees and how this goes hand in hand with the building savings business model. On Tuesday it is in front of the Federal Court for an account fee. (Az. XI ZR 308/15)
How does building society work?
It’s a combination of saving money and lending money – both at low interest rates and geared toward several years. Customer and bank agree on a certain home savings. In the first few years, the customer saves an amount. If a certain balance is reached, he can have the money paid off and take a loan for the remainder of the agreed amount. The interest rates are set in advance in many tariffs and thus independent of the capital market.
Is building society still in fashion?
According to industry information, at the end of 2016 there were about 29 million home savings contracts in Germany. This means that every household has at least one. 2.2 million contracts were newly concluded in 2016 – a high value.
Nevertheless, business is no longer good for building societies. Why?
Because of low interest rates in the euro area, there are cheap loans. Many building society savers therefore refrain from using their right to a loan and remain in the savings phase. The building societies must then pay their customers further interest on the savings, instead of taking interest on loans themselves.
What are the companies doing about it?
“Building societies are able to withstand even extreme interest rate scenarios, but only on the condition that they can use all countermeasures,” says Alexander Nothaft from the Association of Private Building Societies. This means: new tariffs, save costs, terminate old contracts – and also charge fees.
What fees do the building societies collect?
Essentially closing and account fees. A loan fee that became due when the home loan saver wanted to take advantage of the loan, tilted the Federal Court of Justice at the end of 2016. The closing fee, which arises at the conclusion of the contract, Karlsruhe confirmed against 2010.
So far, Wüstenrot, the largest private building society, and Badenia, which has now been sued by consumer advocates, have set their money on account fees. Other funds charge similar fees under the name “service fee” – sometimes only during the savings phase.
What is the problem with the account fee?
The consumer center North Rhine-Westphalia sees this as an inappropriate disadvantage. “Building societies should not make their money in the loan phase via fees, but over interest,” says consumer advocate Christian Urban. “Fees may only be charged for additional services.” Badenia asserts the fee for “building management, collective management and management of an allotment asset”. The previous instances had nothing to complain about.
In that case, it’s only 9.48 euros a year. Is it worth it?
From the point of view of the industry already, finally läppert with the number of contracts. “The account fees have – especially in the context of low interest rates – a significant income share,” said the Badenia. Incidentally, the fee is not new: the building society has been raising it for more than 50 years.
Why are consumer advocates complaining then right now?
Background is a ruling of the Federal Court of Justice in 2011. The Karlsruhe judges tipped at that time an account fee for consumer loans: The bank manage the account only for their own accounting purposes. The customer has nothing of this and therefore can not be involved in the costs. From the point of view of consumer advocates, this decision is transferable to account fees that home savings savers must pay during the loan phase.