Germany’s leading neobrokers are under scrutiny. The Consumer Protection Association of Baden-Württemberg has issued formal warnings to both Trade Republic and Scalable Capital. The reason? Their highly popular interest rate offers, which, at first glance, seem attractive but, according to consumer advocates, lack sufficient transparency.
Consumer Protection: “These Providers Mislead Their Customers”
Trade Republic and Scalable Capital have made headlines by offering 2.75% interest on uninvested cash. However, consumer advocates argue that these platforms are not being entirely upfront about the conditions and risks associated with these offers.
The main issue revolves around how these fintech companies store customer funds and how they communicate this to their users. While part of the money is held in trust accounts at partner banks—where deposits are covered by the €100,000 deposit guarantee scheme—another portion is invested in money market funds. Unlike bank deposits, these funds are not covered by deposit insurance.
In a worst-case scenario—such as the insolvency of a company or government that issued short-term bonds—money market funds could suffer losses. While this risk may be theoretical, consumer protection groups argue that customers should be clearly informed about all potential downsides.
What Happens Next?
The warnings issued by the Consumer Protection Association could have significant consequences for these fintech giants. Will Trade Republic and Scalable Capital adjust their communication practices? Or will they face legal action?
For an in-depth analysis, journalist Lukas Zdrzalek and his team at WirtschaftsWoche have conducted an exclusive investigation. The full report is linked in the comments.