Summary of the Ombudsman's Report 2009

Ombudsmann
der privaten Banken
Tätigkeitsbericht 2009
Berlin, August 2010

106 ombudsmann der privaten banken – tätigkeitsbericht 2009
7 Summary of the Ombudsman’s Report 2009
To settle disputes between banks and their customers as
quickly and smoothly as possible, Germany’s private commercial
banks introduced an out-of-court conciliation procedure
as early as 1992: the Ombudsman Scheme. The Ombudsman
Scheme is the centrepiece of the private commercial banks’
overall consumer policy scheme, which rests on four pillars:
consumer education, consumer information, contract transparency
and out-of-court dispute-resolution facilities.
1. The Ombudsman Scheme
under the statutory limitation period during the ombudsman
proceedings. If their complaint to the ombudsman is upheld,
they obtain redress quickly and easily. The private commercial
banks have undertaken to accept ombudsman decisions in
disputes involving amounts up to €5,000. This binding effect
of ombudsman decisions should not be taken for granted; it is
not standard practice in dispute-resolution schemes operated
by the business sector on a voluntary basis. Experience has
shown that banks often accept ombudsman decisions against
them even where disputes involve amounts exceeding €5,000.
a. Out-of-court dispute resolution
As an alternative to the often inconvenient, time-consuming
and expensive option of legal action, Germany’s private commercial
banks offer their customers a widely accepted, effective
procedure whereby disputes are resolved unbureaucrati -
c ally and quickly by an independent, impartial person – an
ombudsman. The Ombudsman Scheme is designed primarily
for consumers, but it is also open to firms and professionals to
handle disputes about credit transfers or misuse of payment
cards. Details of how the scheme works are set out in the Rules
of Procedure approved by the Federal Ministry of Justice for
the settlement of customer complaints in the German private
commercial banking sector, which are printed in the Appendix
to the Ombudsman’s Report.
The benefits of this modern dispute-resolution scheme are
obvious: the scheme is free of charge to bank customers
and does not involve any risks for them. If they do not accept
the ombudsman’s decision, they are still free to go to a
court of law. They cannot lose out by forfeiting their claims
b. The ombudsmen
The high level of public acceptance that the private commercial
banks’ Ombudsman Scheme enjoys is due, to a great
extent, to the quality of the ombudsmen themselves. These are
former senior judges or legal professionals whose personality
and proven expertise ensure impartial proceedings:
• Ekkehard Bombe, former judge at the Constitutional
Court of Hesse and president of Wiesbaden Regional Court
• Horst-Diether Hensen, former vice-president of the
Hanseatic Higher Regional Court, Hamburg
• Dr Gerda Müller, former vice-president and presiding
judge at the Federal Supreme Court
• Dr Gerhart Kreft, former presiding judge at the Federal
Supreme Court
• Werner Weiß, former senior justice ministry official
in Bavaria and presiding judge at the Munich Higher
Regional Court.

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c. Management of complaints
A Customer Complaints Office was set up at the Association of
German Banks as a gateway to the Ombudsman Scheme. Any
customer of a private commercial bank can contact this office in
writing if they feel that they have been treated unfairly by their
bank. All they have to do is give a brief account of the facts of
the matter, enclosing copies of the required documents (e.g.
cash account or securities account statements). Complaints in
English and French submitted by customers resident abroad
are also processed; in this case, however, the ombudsman
proceedings can take longer, as translations may be required.
A fully intended consequence of the introduction of the
Ombudsman Scheme is that most private commercial banks
have set up schemes of their own to handle customer complaints.
These in-house complaint-settlement schemes have
been a success. A large number of complaints do not need to
be settled by an ombudsman. In many cases, simply explaining
banking procedures or complex, abstract banking transactions
takes care of any disputes in advance.

108 ombudsmann der privaten banken – tätigkeitsbericht 2009
2. Statistics
a. Number and outcome of complaints
The failure of Lehman Brothers on 15 September 2008
triggered a rise in the number of complaints from the fourth
quarter of 2008 onwards, which continued throughout 2009.
At the end of the year, the number of complaints received
totalled over 6,500. This was an increase of around 35% compared
with 2008.
In addition, around 2,400 complaints against non-members
were received during this period and forwarded to the relevant
dispute-settlement bodies.
As the above table shows, 1,005 complaints in 2009 were not
followed up by the complainants and thus did not require an
ombudsman decision. Over 800 of the complaints received
in 2009 were inadmissible under the Ombudsman Scheme.
In some of these cases, the complainants were not, for example,
consumers or not themselves customers of the bank
concerned. Such cases involved, for instance, complaints by
customers that money remitted by them was credited to a
different account at the payee bank than that specified in their
instructions. In accordance with Section 4 (4) sentence 3 of the
Rules of Procedure for the Ombudsman Scheme, ombudsmen
proceedings were not possible in over 500 of the inadmissible
cases as evidence could not be provided through the presentation
of documents, and the hearing of witnesses would have
been necessary to settle the complaint.
Taking into account all the cases already closed, just about
60% of the complaints admissible under the Ombudsman
Scheme were resolved in favour of customers or settled on
an amicable basis. Often simply explaining banking procedures
or complex, abstract banking transactions resolve disputes
in advance.
Where banks examined a customer’s complaint internally and
found it to be legitimate, they often provided redress without
referring the complaint to the Ombudsman Scheme. Banks
also settled some of these complaints on a goodwill basis. In
169 cases, the ombudsman proposed a compromise agreement
between the parties to settle the complaint. Just under
40% of the admissible complaints were settled in favour of
banks.
Since almost 1,000 complaints were still being processed when
the Ombudsman’s Report 2009 was published, a marked shift
in the outcome of complaints in favour of customers is currently
indicated. The outcome of complaints has been relatively
evenly balanced during the past five years, how ever, with usually
just over 50% of complaints being resolved in favour of
customers. Once all the outstanding complaints have been
dealt with, it is therefore likely that the present figure will be
much the same.

ankenverband 109
Overview of number and outcome of complaints received annually: 2005–2009
Area 2005 2006 2007 2008 2009
Total number of complaints 2,791 3,753 3,610 4,837 6,514
Complaints not followed up by customer 457 607 617 744 1,005
Inadmissible/unsuitable complaints (1) 718 598 385 734 827
Admissible complaints 1,616 2,548 2,608 3,359 2) 4,682 3)
Complaints resolved in favour of customer (also partly) 851 1,423 1,403 1,792 2,076
Compromise proposed by ombudsman 43 51 68 88 169
Complaints resolved in favour of bank 722 1,074 1,137 1,436 1,465
Source: Association of German Banks, 30 June 2010.
1) Admissible complaints under the Rules of Procedure which the ombudsman nevertheless declines to resolve as further evidence-taking would be necessary.
2) Of the 3,359 admissible complaints, 43 are still being processed.
3) Of the 4,682 admissible complaints, 972 are still being processed.

110 ombudsmann der privaten banken – tätigkeitsbericht 2009
b. Breakdown of complaints by subject matter
Depending on their main focus, the complaints received by
the Customer Complaints Office are assigned for statistical
purposes to one of the following areas:
• Securities business
• Lending business
• Payments business
• Basic account
• Guarantees/third-party security
• Savings business
• Miscellaneous
The complaints made by consumers reflect all aspects of
banking business. The following table contains a five-year
comparison of the trend in complaints, broken down into
in dividual lines of business. This breakdown provides an
overview of the main focus of the complaints received by the
Association of German Banks in 2009.
As in 2008, the number of complaints relating to securities
business increased strongly, and now accounts for nearly half
of all complaints received. All other lines of business also recorded
an increase in the number of complaints.

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Complaint areas 2005–2009
Area 2005 2006 2007 2008 2009
Securities business 681 725 796 1,867 3,105
in % 24.4 19.3 22.0 38.6 47.7
Lending business 1,026 1,006 898 1,000 1,072
in % 36.8 26.8 24.9 20.7 16.5
Payments business 644 1,234 1,172 1,252 1,517
in % 23.1 32.9 32.5 25.9 23.3
Basic account 170 431 386 354 358
in % 6.0 11.5 10.7 7.3 5.5
Savings business 243 300 272 254 348
in % 8.7 8.0 7.5 5.3 5.3
Guarantees/third-party security 19 19 18 11 11
in % 0.7 0.5 0.5 0.2 0.2
Miscellaneous 8 38 68 99 103
in % 0.3 1.0 1.9 2.0 1.5
Total 2,791 3,753 3,610 4,837 6,514
Source: Association of German Banks, 30 June 2010.

112 ombudsmann der privaten banken – tätigkeitsbericht 2009
Because of the global stock market slump, the financial crisis
was reflected in ombudsman proceedings primarily in the field
of securities business. The chart shows that most complaints
in this area – around 77% – concerned investment advice.
In 2008, 1,324 complaints about investment advice were
re ceived; in 2009, on the other hand, the figure was 2,404,
almost twice as many.
Complaints relating to securities business
in 2009
Portfolio management
Settlement
274 427
One-third of these complaints were related to the sale of
various Lehman Brothers certificates. Customers complained,
for example, that they were not made aware of the potential
issuer risk involved or that the certificates did not fit their
personal risk profile. Although the number of complaints
concerning Lehman Brothers certificates was not particularly
high, the failure of this investment bank led to a significant
decline in the value of investments last year. The bad performance
of their investments and the resulting losses were
further grounds in many cases for customers to turn to the
ombudsman. Customers often complained that they were not
advised properly by their bank when purchasing securities
and that, contrary to what they originally intended, they were
instead encouraged to make risky investments, or that the
specific risks attached to a security they purchased were not
explained fully to them. In some cases, customers sought to
make the bank liable for the losses they incurred without,
however, being able to show that they had any legal claim to
compensation. Such complaints usually do not resolve themselves
beforehand, so that the ombudsman has to make a
decision every time.
2,404
Investment advice/asset management
Source: Association of German Banks, 30 June 2010.

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Complaints relating to lending business
in 2009
Consumer loans
Lending business accounted for a total of 1,072 complaints in
2009, an increase of around 4% compared with the figure for
the previous year (1,000).
681
391
In the case of mortgage loans, there were still several complaints
in 2009 about the charging of property valuation fees.
These complaints, filed on the strength of the ruling by the
Stuttgart Regional Court in April 2007, centred on the question
of who has to pay the cost of a valuation made prior to a loan.
The ombudsman refrained from taking any action in many
cases, as banks were usually able to successfully invoke the
statute of limitations.
Mortgage loans
Although the way banks calculate the early repayment penalty
has been clarified by the Federal Court of Justice, complaints
were received – as in previous years – about the size of the
fee charged for repaying a loan early. Penalties were therefore
only questioned by the ombudsman, and banks asked to
recalculate these, in a small number of cases.
Source: Association of German Banks, 30 June 2010.
Both in mortgage lending and consumer lending business,
difficulties in repaying loans played a not insignificant role in
2009. Most complaints in this field were filed by customers in
the hope that their bank would accommodate them under
ombudsman proceedings. As, however, business-policy
decisions by banks are involved here, the ombudsman cannot
make any decision in these cases.
In quite a large number of cases, complaints concerned the
new loan terms offered by a bank once a fixed-interest period
expired. In a few cases, complaints were also received about

114 ombudsmann der privaten banken – tätigkeitsbericht 2009
Complaints relating to payments business
in 2009
bank financing to purchase a property because the market
value of the property was seen to be too high.
Card-based
253
Non-card-based
275
In consumer lending business, complaints also often centred
on whether loan interest rates were appropriate and on the
way banks adjusted variable interest rates. Along with the
question of whether a bank was actually allowed to terminate
a loan in the first place, the fact that it reported termination
of the loan to SCHUFA (Germany’s largest credit reference
agency) also gave rise to complaints in many cases.
989
In payments business, 65% of complaints concerned problems
in connection with account management, including opening
and closing accounts. The remainder were related to conventional
payments, especially card transactions (17%) and credit
transfers (18%).
Account management
Source: Association of German Banks, 30 June 2010.
In 2009, card-based payments gave rise to 253 complaints.
Besides the allegedly unjustified deduction of fees and the
size of withdrawals made at ATMs, a further focus of these
complaints was the question of liability for fraudulent use
of payment cards. A total of 275 cases were referred to the
ombudsman because the bank deducted credit transfer fees
that the customer considered unjustified, or executed credit
transfers wrongly or failed to execute credit transfers at all. In
some cases, customers complained about fees charged for an
account they no longer used and, in others, about the closure
of an account.

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3. Recognition of the
Ombudsman Scheme
The German private commercial banks’ Ombudsman Scheme
is widely recognised – not only by customers and banks, but
also by government bodies at national and European level:
In the case of disputes between customers and private
commercial banks relating to credit transfer law and misuse
of payment cards, the ombudsman replaces the conciliation
body set up at the Deutsche Bundesbank under the German
Prohibitory Injunctions Act. The Federal Ministry of Justice has
entrusted the Ombudsman Scheme with the public disputeresolution
function in this field for the private commercial
banks.
In the case of disputes between consumers and foreign
financial services undertakings, the Customer Complaints
Office helps to find the appropriate complaints office abroad.
The German private commercial banks’ Ombudsman Scheme
supports the Consumer Complaints Network for Financial
Services (FIN-NET), set up by the European Commission,
which links up recognised dispute-resolution schemes in the
European financial services sector.
4. Conclusion
The global financial crisis poses a particular challenge to banks
as well as the Ombudsman Scheme in the year ahead. Banks
themselves must make a major contribution towards restoring
investor confidence lost as a result of the crisis.
The Association of German Banks has taken up this challenge
by launching a number of measures in the field of consumer
protection, particularly in relation to investment advice. For
example, in May 2009 it published “Guidelines for strengthening
investor confidence in retail banking”. In March 2010, it
presented a model product information sheet designed to
improve transparency and comparability by providing a brief
and concise description of an investment product. In doing
so, it was not only following up ideas tabled by the Federal
Ministry for Nutrition, Agriculture and Consumer Protection,

116 ombudsmann der privaten banken – tätigkeitsbericht 2009
but also taking into account future European Commission requirements.
In addition, the Association played a constructive
role in introducing the written record of investment advice
that banks have been required to provide to customers since
January 2010.
The financial crisis naturally also had a significant impact on
the work of the private commercial banks’ ombudsmen dur ing
the year under review. The number of complaints rose sharply
in the final quarter of 2008, shortly after the collapse of Lehman
Brothers. This trend continued throughout 2009, leading
to the largest number of complaints handled by the Ombudsman
Scheme since its inception. By far the most com plaints
concerned investment advice. Here, the ombudsman has to
decide objectively and unemotionally whether a financial loss
incurred by a customer in an individual case was due to wrong
advice provided by the bank. As an independent third party,
the ombudsman has to consider the facts of the case presented
by both parties impartially, and assess the arguments
from a legal standpoint. This is the basis for the ombudsman’s
decision. Re-examination of the dispute in the ombudsman
proceedings helps each party to better understand the other’s
arguments and offers the chance to renew the relationship of
trust between them through the services of the ombudsman
as an independent third party.