If your fraud detection cant do anything with name, address, phone number, and credit card and you need Drivers License/Passports then you probably need to pay for a better one.

What do you expect a German company to do with a copy of your drivers license or passport? Is this one of those situations where it contains your your social security number and it therefore becomes direct access to your bank account?

The only thing I imagine someone could do with the copy of my passport is pretend to be me when they sign up for a similar service.

Yes, pretend to be me and charge me for their actions. We call this identity theft and it is a rampant problem.