WRITTEN QUESTION E-3327/00

by Christoph Konrad (PPE-DE) to the Commission

(25 October 2000)

Subject: Consumer protection and unfair commercial practices and sales methods

In Germany some 100 000 people have been the victims of organised mass fraud under dubious trustee model funding schemes. Intermediary sales organisations are used to hold out the offer of purchasing real estate (condominiums) and shares in closed-end real estate funds with high tax advantages and high returns based on 100 % financing and guaranteed rents. However, they fail to deliver.

This poses the following questions:

1. Is the Commission aware of the mass indebtedness of deceived purchasers as a result of '100 % financed real estate purchase' (housing and financing in the same package) via agreements between banks, trustees and vendors, and is this an infringement of European consumer law?

2. Does the Commission take the view that these unfair practices are also an infringement of the principle formulated by the Commission, and acknowledged by the other EU bodies, of guaranteeing unreservedly the economic and legal interests of consumers in the EU and of counteracting the problem of debt overload of consumers as a result of snowball sales(1)?

3. What action does the Commission intend taking to regulate the practices of legally independent sales organisations with questionable methods towards consumers (aggressive approaches to deals, misleading or inaccurate information, failure to honour promises made in advertisements)?

4. What is the Commission's view of the question of the law of obligations and liability with regard to violation of the banks' duty of care (banks as lenders and at the same time as a party to the investment through financing agreements between the bank and the sales organisations and through financing contracts)?

5. What opportunities are available to consumers who are highly indebted as a result of trustee model financing to enforce their right to compensation through the courts?

(1) See the Communication from the Commission of 2 December 1998 Consumer policy action plan 1999-2001 (COM(98) 696) and resolutions of the European Parliament and the Council on this communication. See also Decision No 283/1999/EC of the European Parliament and of the Council of 25 January 1999 establishing a general framework for Community activities in favour of consumers.

Answer given by Mr Byrne on behalf of the Commission

(17 January 2001)

1. The Commission was not aware of the extent of the business practices mentioned by the Honourable Member. Given the information available, it does not seem, that, these practices are covered by existing Community consumer protection law. Possibly, these practices could involve cases of misleading advertising according to Council Directive 84/450/EEC of 10 September 1984 relating to the approximation of the laws, regulations and administrative provisions of the Member States, concerning misleading advertising(1). However, this Directive leaves Member States, to a large extent, room for implementation and specific complaints should therefore be addressed to competent authorities in the Member States concerned. From the information available, an infringement of Community consumer protection law cannot be presumed.

2. and 3. Practices like the ones mentioned by the Honourable Member do certainly damage economic and legal interests of consumers.

In its Consumer Policy Action Plan 1999-2001(2) the Commission undertook to examine the feasibility of a general framework on fair trading. In line with this commitment, the Commission is preparing a communication on this issue, which will be submitted to the Community institutions in a few months. However, it is not clear from the information available, if the incriminated practices would fall under the scope of such a general framework on fair trading.

In any case, even a general framework to trade fairly does not necessarily prevent criminal practices. The practices as described by the Honourable Member could indeed involve criminal behaviour.

4. The possible contractual liability in these cases is a matter of German private law and not regulated by Community law.

5. The concerned consumers could consult legal advice or contact consumer associations for advice or support according to German law.

(1) OJ L 250, 19.9.1984.

(2) COM(98) 696 final.