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Stand:updated on 19.04.2022 | Topic Consumer protection How does BaFin help consumers?

Consumers buying financial products, using financial services, or planning to do so, require a degree of protection. Consumer protection is therefore an important social responsibility – and this also applies to the Federal Financial Supervisory Authority (BaFin).

The tasks relating to consumer protection are shared. BaFin is responsible for collective consumer protection, i.e. it protects the interests of consumers as a whole in the financial market. For example, in the interests of all consumers, BaFin supervises the various financial institutions and monitors their stability, ensuring the integrity of the overall financial system. It does this alongside its other statutory tasks in the field of banking supervision, insurance supervision and securities supervision.

Collective consumer protection is laid down as one of BaFin’s supervisory objectives in the Retail Investors Protection Act (Kleinanlegerschutzgesetz). However, BaFin’s remit does not cover individual consumer protection. This is the responsibility of ombudsmen, arbitration boards and the ordinary courts.

BaFin’s Consumer Protection Directorate

BaFin wants to provide adequate protection for consumers as a whole. It’s Consumer Protection Directorate, which specialises in this field, deals with the wide range of consumer protection issues that lie within BaFin’s remit. It is located at both BaFin offices: Bonn and Frankfurt am Main.

In his role as the Investor and Consumer Protection Officer, the Director-General for Consumer Protection advises the Executive Board. By setting up this function in 2021, BaFin has strengthened its commitment to consumer protection.

Supervisory instruments

Measures to promote transparency

In principle, consumers should be able to make informed decisions independently and without feeling patronised. BaFin therefore strives to ensure that the range of financial products, insurance products and financial services on offer is transparent and comprehensible. In particular, the rules on consumer information promote this transparency. An example is the key information document for investment products, which helps consumers with packaged investment products and insurance-based investment products. The information the sellers provide – whether under legal obligation or voluntarily – must be structured, in terms of both form and content, to suit the knowledge and needs of consumers.

Consumer education

BaFin provides information to consumers and, by so doing, strengthens its financial literacy. It thus helps people to better understand questions of finance and enables them to make decisions independently.

In the area of consumer education, BaFin specifically addresses various target groups. Amongst other things, it has published two investment guides, one for school leavers (“Finanzplanung nach der Schulzeit”) and one for people in retirement (“Geld anlegen im Ruhestand”).

On its website under the heading Consumers, BaFin provides general information on investing. It also offers special information, for example on how the most important banking products, securities and insurance products work and what risks they entail. BaFin also regularly publishes expert articles on contemporary issues on its website. The offer of information is rounded off by brochures and other media, such as videos.

Consumers can also obtain information by calling up BaFin’s consumer helpline on 0 800 2 100 500 (or +49 (0) 228 299 70 299 for calls from abroad).

In this way, BaFin wants to give consumers some initial guidance and make it easier to compare offers – without recommending any particular product or course of action.

Active market monitoring

BaFin monitors the financial market in order to identify at an early stage developments of relevance to consumers and that could lead to risks or irregularities. Its objective is to not only react in the face of suspicious circumstances but to pre-emptively initiate adequate countermeasures. To do this, BaFin records, analyses and assesses information on market activity from internal and external sources. In addition, it carries out consumer and market surveys.

Mystery shopping

Since January 2022, BaFin has been conducting mystery shopping, i.e. anonymously testing the quality of services and products. In this way, BaFin gains an impression of how companies behave towards their customers and whether, for example, they are meeting their statutory obligations when offering advice and selling products. Mystery shopping can therefore be made wherever financial services or financial products are being provided or sold to consumers or retail investors, in other words, wherever statutory consumer protection laws apply – whether in the fields of classic investment advice, loan granting or insurance distribution.

Complaint processing

Anyone having trouble with a credit institution or insurance company can file a complaint with BaFin. These complaints provide BaFin with important information about the issues and problems of concern to consumers.

Furthermore, complaints about the business practices of a supervised company can reveal flaws in the company’ organisational arrangements that affect the collective interests of consumers. Complaints therefore also provide important impetus for identifying and rectifying irregularities.

Supervision of compliance with rules of conduct

BaFin’s Consumer Protection Directorate checks that credit institutions or insurance companies comply with the rules of conduct in their dealings with customers when offering their products and services. Besides active market monitoring and complaints processing, supervisory visits and company inspections in particular serve as important sources of information for preventing or rectifying irregularities. BaFin may in particular issue orders to supervised companies in order to prevent or resolve violations of consumer protection law if deemed necessary in the interests of consumer protection.

Product intervention

In serious cases, BaFin may even restrict or altogether prohibit the distribution of products or certain distribution practices. This is the case if there are major investor protection concerns or risks for the orderly functioning and integrity of financial markets.

Cooperation on consumer protection

BaFin’s Consumer Protection Directorate also maintains contact with the market monitoring and financial markets team at The Federation of German Consumer Organisations (Verbraucherzentrale Bundesverband – vzbv), and is point of contact for The German Centre for Protection Against Unfair Competition (Wettbewerbszentrale), a self-regulatory industry organisation, established to enforce laws against unfair competition.

Active involvement in international committees

For BaFin, consumer protection is not a purely national concern. Germany’s financial supervisor is actively involved in various European and international committees, working groups and forums. This is an opportunity for BaFin to contribute to further developing the international standards of collective consumer protection.

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