Financial advice and consumer protection
Consumer protection is crucial to safeguard the rights and interests of consumers in the marketplace, including the financial sector.
A number of laws and the work of consumer protection organizations protect consumers from unfair practices, fraud and unsafe products, among other things. Since companies often have more information than consumers, it is important to establish a balance, promote transparency and strengthen the rights of consumers.
Especially in the financial sector, it is important to protect consumers. Financial services are often complex. Wrong decisions can have significant negative consequences. That is why consumer protection in the financial sector focuses, in particular, on lending practices, contract terms and information.
Canceling a purchase
Contracts are legally binding and both contracting parties are obliged to fulfill them. A contract cannot simply be canceled if you later realize that you do not want or need it. It is important that all parties involved can trust that the contract will be executed. This applies to both companies and consumers.
Example
Hanna buys a book that she has wanted to read for a long time. Two days later her friend gives her the same book for her birthday. Hanna would like to cancel her purchase and brings the book with the receipt back to the bookstore. The seller does not want to give Hanna her money back. After a short discussion, they agree that Hanna can give back the book and get a voucher worth the purchase price instead.
There is no statutory right to return an item bought in a shop. The seller decides how they want to handle returns. It is a voluntary service provided by the seller. If you have bought goods in a stationary shop, the seller does not have to take them back. The seller can insist that certain criteria be met so that they take an item back. For example, the seller may demand that the item is still in its original packaging, or they can give you a voucher worth the price of the returned item instead of cash. You have no statutory right to a refund of the purchase price.
Tip
- If you are unsure about your purchase, ask the shop assistant about replacement, return and refund options. Ideally, you get such information in writing, e.g. “replacement possible within ... days of purchase” printed on your receipt.
The situation is different when you buy things online (distance selling). Since seller and consumer are not in personal contact when agreeing on a sale, special regulations apply. These are statutory requirements, meaning there is no need for a specific agreement between buyer and seller. For goods or services bought online (or through other media of distance communication), the consumer has the right to cancel their purchase (return an item) within 14 days. However, there are a few exceptions to which this rule does not apply, for example food but also financial products, such as tradable securities, derivatives and foreign currencies (according to the Distance Financial Services Act). For more information on consumers’ rights in distance selling and the exceptions to the right to cancel, see the website of the Austrian Ministry of Social Affairs, Health, Care and Consumer Protection. Additional information can be found on the websites of the Austrian Economic Chambers (WKO) and the Chamber of Labour.
Example
Philipp buys a new games console. After only a few weeks, the games console no longer connects to the TV. A quick Internet search shows that there might be a problem with the built-in port. Philipp takes the games console and the invoice back to the store where he bought it. The shop assistant tells Philipp that the games console is not under guarantee because he did not register it immediately after he bought it. They also say that they only take back items that are still in their original packaging.
In Austria, warranty is a service the law requires a seller to provide. The seller is responsible for selling products or providing services that are free of any defects. In business transactions between companies and consumers, there may be no restriction or exclusion of warranty claims. If the buyer detects a defect that they did not cause, the seller has to ensure that the defect will be corrected. In a first step, the buyer may choose whether they want the seller to improve/repair or replace the product or service. This way companies get a “second chance” to fulfill their part of the contract. Note: The customer has no right to choose in cases where repair or replacement would require an unreasonable amount of effort from the seller. Only after the company had its “second chance” can the buyer – under certain conditions – withdraw from the contract or demand a price cut.
Up to one year after the purchase, the company has to prove that the defect was not already there at the handover date. After one year, the burden of proof shifts to the customer. New items need to be free of defects for two years. For used goods, this period can be shortened to one year. In the case of immovable items, like properties, houses or apartments as well as, for example installed central heating systems, this period is three years.
Tip
- After an item has been replaced or repaired, the warranty period starts anew. In case of replacements, the warranty period applies to the replaced items. In case of repairs, the warranty period applies to all replaced or repaired parts.
For further information on Austrian warranty law, see oesterreich.gv.at and the website of the Chamber of Labour of Upper Austria.
Tip
- Always keep invoices and receipts to be able to provide proof later on. An invoice or a receipt proves that you actually bought the goods from the company. Moreover, in most cases the warranty period starts with the invoice date. For items that are picked up later than the date shown on the invoice (e.g. in the case of furniture that needs to be ordered), you should keep the delivery note.
A guarantee is a contractual agreement between the manufacturer and the buyer. It is a voluntary service, providing for more cover than the statutory warranty. How a guarantee works in practice, depends on the agreement with the manufacturer. The manufacturer can determine certain terms (e.g. the duration of the guarantee period, whether it is necessary to register an item). Guarantees are a way for manufacturers to convince potential buyers of the quality of their goods.
Example
Even if Philipp is not able to claim a guarantee on his games console, he can still claim warranty. The defect occurred within a few weeks after the handover of the console. That means Philipp does not have to prove that the defect was already there but not yet noticeable at the handover date. As a first step, the manufacturer will probably try to repair the built-in port. Philipp can only cancel the purchase if the problem occurs again shortly after the repair or replacement. This would mean giving back the games console and getting a refund of the purchase price.
Warranty applies regardless of whether or not a sale/purchase was made online or in the presence of both the buyer and the seller. It ensures that the contract is executed as originally agreed upon. In online purchases, the seller may demand that the buyer sends back the item at the seller’s expense for repair or replacement.
Warranty also applies to goods with digital elements or digital services. The seller/manufacturer has to update digital elements and digital services in order to ensure the contract is executed. For ongoing contracts, this applies for the entire contract period. For goods with digital elements, the minimum update period is two years.
Consumer Finance Act
The Consumer Finance Act protects consumers from, among other things, misleading bait advertising for loans and installment payments with charges. However, the law does not apply to loans of up to EUR 200 or a loan period of up to three months. Consumers have special rights, for example the right to early repayment of the loan at any time and to a limit on the compensation payment in the event of early repayment. Lenders often demand such a compensation, because they earn less interest income when a borrower repays a loan ahead of schedule. In addition, lenders have a number of information obligations. This also includes the obligatory assessment of the borrower’s creditworthiness; if it is found to be inadequate, the lender may refuse to enter into an agreement with the borrower. In addition, the lender must disclose the effective annual interest rate so that the borrower is able to compare different offers. If the effective annual interest rate is disclosed incompletely or not at all, the lender will only get back the loan amount without interest or other charges in case the agreement gets canceled.
An important provision of the Consumer Finance Act is the consumer’s right of withdrawal from a contract within 14 days. This allows consumers to cancel a purchase and any related financing agreements.
These and other measures are meant to prevent that seemingly good deals turn out to become very expensive for the consumer in the long term. That said, it is always good to check carefully whether you really need a loan before signing an agreement; it is best to avoid any situation in which you need to use your right to cancel. For further information on the Consumer Finance Act, the information obligations of the lender and the rights of borrowers, go to the website of the Austrian Economic Chambers (WKO).
Distance Financial Services Act
Financial service providers often use websites or apps to do business with consumers. The Distance Financial Services Act (Fern-Finanzdienstleistungsgesetz or FernFinG) regulates consumer protection in financial services that are offered through means of distance communication like the telephone or the internet. According to the act, all banking services as well as services that have to do with lending, insurance, pension savings, investments or payments are financial services. That means loan and insurance brokerage is also a financial service. The Distance Financial Services Act aims to protect consumers from making rushed decisions about financial contracts, enhance transparency and ensure fair terms between financial service providers and consumers. Similar to the Consumer Finance Act, it enables consumers to withdraw from contracts within 14 days after signing them. Consumers do not have to give any reasons for withdrawing from contracts during this period.
Note: There are also exceptions to the right of withdrawal. The right of withdrawal does not apply to financial services contracts for products that are subject to major fluctuations, for example, to the purchase of tradable securities or derivatives through an online broker. Neither does the right to withdraw apply to travel insurance or insurance policies covering a period of under a month. For a brief summary of the Distance Financial Services Act, see the website of the Consumer Protection Association (VKI). For further information, see the website of the Austrian Economic Chambers (WKO).
A quote is a detailed statement of the estimated total cost of a job, including labor, material and other costs. A final quote must include the gross price including VAT and other fees or add-ons. The price is binding unless marked otherwise.
In the case of nonbinding cost estimates, the final price can be up to 10–15% higher. If the actual price exceeds the price quoted in a nonbinding estimate by more than 15%, the company has to immediately inform the customer. If the company fails to do so, they cannot charge the higher price. Consumers have two options when the company informs them that the actual price would be significantly higher: They can agree to the higher price and pay, or they can withdraw from the contract. In the latter case, they still have to pay for any work that has already been done.
Always check quotes or cost estimates for completeness so that you can be sure that you will not be invoiced an unexpected higher amount. For further information on quotes and cost estimates, see the website of the Chamber of Labour and the website Konsumentenfragen.at of the Austrian Ministry of Social Affairs, Health, Care and Consumer Protection.
Consumer protection organizations
Despite all the information available online, sometimes it makes sense to get expert advice for your individual situation. In Austria and the EU, there are many consumer protection organizations and information centers for consumers.
For more information on consumer protection and information centers in Austria, further links and contact options, see the website of the Austrian Ministry of Social Affairs, Health, Care and Consumer Protection. The Consumer Protection Association (VKI) offers advice and comprehensive information on questions regarding consumer protection. For further information, see the website of the VKI.
A brief recap
How do the general rules for contracts affect the possibility of returning purchased items?
In general, contracts are binding, which means that purchased items usually cannot be returned or exchanged. However, companies can voluntarily offer replacements and returns. When buying online or through other means of distance communication, you have a statutory right to return the item you bought.
What rules on the right to cancel a purchase apply in distance buying?
If you buy an item through means of distance communication like the internet or telephone, you have a statutory right to withdraw. Buyers can withdraw from these kinds of contracts within 14 days of concluding them. Note: There are also exceptions, for example for food, custom-made items or securities.
In Austria, what is the difference between a warranty and a guarantee?
In Austria, warranty is a statutory right of the consumer that cannot be limited or excluded; a guarantee, by contrast, is a voluntary service provided by the manufacturer.
How does the Consumer Finance Act protect consumers?
The Consumer Finance Act protects consumers from misleading loan or installment payment offers. It specifies special rights for consumers. Lenders have to check the creditworthiness of – potential – customers and have to provide information on the effective annual interest rate so that borrowers can make informed decisions. A right to cancel within 14 days protects consumers from the consequences of making rushed decisions.
How does the Distance Financial Services Act protect consumers?
The Distance Financial Services Act regulates consumer protection in financial services that are offered through means of distance communication like the internet. It covers banking services, loans, insurance and other financial products. The aim is to protect consumers by ensuring transparency and fair contract terms. Consumers can withdraw from contracts without giving any reason within 14 days of concluding them. Note that there are also exceptions to this right.
What do I need to look out for in quotes?
A quote must state all estimated costs. A nonbinding cost estimate may provide a price that is not the final one, which can be up to 10–15% higher than originally stated. If the final price will be higher than 15% as stated in the nonbinding estimate, the company must immediately inform their customers to be able to really charge the final price. In this case, the customer has two options: They can either accept the higher price or withdraw from the contract and only pay for work that has already been done.
