Refugees in Germany fall easily into debt traps

Ahmad*, a 28-year-old Syrian, came to Germany in 2014, shortly before tens of thousands of people fled from his country towards Europe. Since then, he has managed to learn German and use his skills from his bachelor's degree in communication in Homs toget a job as a counselor in Bonn's city administration.

Like most other asylum seekers coming to Germany, Ahmad was soon overwhelmed with endless varieties of phone contracts and other offers from telemarketing companies. Luckily, he managed to avoid the traps.

"I paid the full amount for my smartphone when I bought it. I don't like phone contracts," he said. "Once I went with a friend to a local electronics store because he needed an interpreter. He had unknowingly signed a contract with a telecommunications company for 400 euros ($454). He had to shell out the money to be able to use his phone."

The debt trap

Such cases are all too common among Germany's new arrivals, explained Petra Maier, the head of the training and research section at North Rhine-Westphalia's Consumer Services Office in Düsseldorf.

Most phone contracts in Germany can be terminated only when the user notifies the company three months before he or she wants to exit the agreement. "Many such things, which are firmly embedded in Germany, are different in the countries of origin of migrants. This leads to financial difficulties," Maier said.

One such example is when refugees are unable to pay their bills on time. Missing several payments could lead to a person being blacklisted by Germany's credit investigation company SCHUFA. A blacklist means a person is unable to rent an apartment because the individual cannot prove his or her creditworthiness.

Maier also described how mobile phone contracts could be misleading. "Smartphone contracts, for example, have reduced prices for devices. A phone costs one euro and the contract is for 24 months. You have to pay through this period and you cannot cancel it at short notice. People then sign many different phone contracts unknowingly, also because in many countries prepaid services are the norm."

Read more: Influx of refugees to Germany sees expansion of mobile phone market

In another instance, electricity providers often send monthly bills, but the consumer also gets a bill at the end of the year with the number of units he has actually used. This may result in extra payments, which people aren't ready for, because it's done differently in their country of origin, Maier explained.

Most of the confusion regarding contracts is because of misunderstanding, but many companies use the consumers' ignorance to their advantage, Maier said. This is where her consumer services office steps in - to warn users before they fall into the trap.

Training and awareness

Tarek*, a 24-year-old photography and design student, has managed to avoid the trap until now, but he did get a shock when he received a phone call three months ago. "A woman called me and wanted me to pay for electricity, but there is no electricity contract in my name. I live in a shared apartment," he explained.

For others wishing to know more about possible loopholes in contracts for smartphones, electricity and fitness studios, Maier's office offers special training and advice.

"We go to integration courses and address these themes, like smartphone contracts, but also subjects like what kind of an electricity provider should I get for my apartment, how much are energy costs in Germany, how does the heating work, because these things and also the housing standards are different here. The climate is also different, so we explain, for example, that it's not a good idea to ventilate your apartment when the heating is on because that will increase energy costs," Maier explained.

The office's courses have been received well by refugees and others wanting a better understanding of the German consumer market. "The 'aha' moments are big because people say, 'why should I pay for 24 months if I'm not even using my phone, I don't need it and I don't even use it?'"

After counseling, most consumers understand what has happened, why things are different in Germany and how one needs to adapt to them. "There is a lot of positive feedback and stories, like counseling on automatic data download [for mobile phones] is quite successful with consumers and they're thankful for the information," Maier said.

*Names have been changed to protect identity