German credit agency warns of massive rip-off | Business| Economy and finance news from a German perspective | DW | 29.10.2012
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Business

German credit agency warns of massive rip-off

German loan suppliers who promise money without checking people's credit more often than not run fraudulent businesses, a fresh study has found. Hundreds of thousands of people fall victim to these practices every year.

Germans who accept a quick loan without a background check could find themselves in even rougher financial waters afterwards, a study commissioned by the biggest national credit investigation agency, Schufa, indicated on Monday.

The survey said that suppliers of such dubious loans were more often than not interested only in securing profits through the collection of fraudulent fees, which plunged cash-strapped clients into even deeper pecuniary woes.

The study found that in only two out of 177 cases, were the credit lines asked for granted to customers, but the money came with an interest rate of about 25 percent.

No trivial matter

Otherwise, the loans were not granted, but clients still had to pay thousands of euros in dubious fees. If those were not paid right away, the agencies which had promised the loans threatened their clients with the speedy arrival of debt collectors.

"It's only about profiting from the situation of people who find themselves in severe financial difficulties," said Business Lawyer Hugo Grote, a co-author of the study. "The fees levied are illegal, but the strategy employed is successful."

Grote demanded that courts across the country step up their efforts to fight that kind of economic crime and called for amendments to current legislation. He added that an estimated 400,000 Germans fall victim to such credit fraud every year, causing damage to the tune of 150 million euros ($193 million) annually.

hg/jr (dapd, dpa)