Customers battle DNB in court

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Norway’s biggest bank, DNB, has landed in more trouble with angry customers. Not only did DNB have to start defending itself Monday against the largest class-action lawsuit ever filed in Norway, it’s also losing customers who found out the bank hasn’t completely severed ties to the controversial Dakota Access Pipeline project in the US after all.

DNB, headquartered here at Bjørvika in Oslo, towers over its competitors and dominates the market in Norway. That’s why the historically large class-action lawsuit against it, filed on behalf of tens of thousands of customers by the state consumer council, is so important, after a long series of other complaints against the bank as well. PHOTO:

The class-action suit, filed on behalf of 180,000 customers by Norway’s state consumer council (Forbrukerrådet), got underway in the Oslo City Court after several years of pre-trial positioning. At issue is whether DNB’s customers allegedly paid a high price for investment management expertise they didn’t receive.

“It’s been a long and thorny road to be able to put forth this complaint,” lawyer Steinar Mageli, who’s representing the consumer council, said during opening arguments Monday morning. He will claim over the course of the trial that DNB must refund nearly NOK 700 million to the customers of three of its stock funds, DNB Norge, DNB Norge (I) and DNB Avanse (I), from 2010 to 2014. All of them allegedly paid high fees for so-called “active management” of their money (1.8 percent of the total placed in the funds), while DNB only delivered “passive” management of the stock funds

The customers’ complaints are backed by the sharp conclusion of state regulators at Finanstilsynet, who claimed in 2015 that DNB had indeed charged fees for a service the bank didn’t deliver. DNB was ordered to either reduce the fees it charged on the three funds, often used by customers trying to save money for their retirement years, or to make sure the funds were actively, or smartly, managed.

DNB did not contest the regulatory order, reduced the fee to 1.4 percent of capital invested and claimed it would make the funds’ management more active. “We chose to follow the order after a total evaluation, even though we have always believed that we have delivered what we promised customers,” DNB spokesman Even Westerveld told newspaper Aftenposten over the weekend.

DNB has indeed denied that it failed to actively manage its customers’ money and that its fees were excessive. Customers were left with poorer returns on their money than they would have received with passive management at a much lower cost. Both sides, however, agree that it’s not the actual returns on the funds that’s at issue, but rather what DNB has done or not done.

DNB tried to halt class-action
DNB has also contested, in earlier court cases, whether the conflict should be handled as a class-action lawuit on behalf of all the funds’ customers. DNB claims customers received various returns in accordance with when they invested, and therefore aren’t a homogenous group, but the bank lost at the local, appeals and supreme court levels.

That’s what led the landmark case that started this week and scheduled to extend into early December. Both sides will be offering expert witnesses including professors, accountants, lawyers and finance experts. The consumer council claims it’s fighting on behalf of all non-professional investors who relied on DNB to handle their money honestly at a fair price.

“Consumers are now expected to take steadily more responsibility for their pensions and how their savings shall be placed,” Randi Flesland, director of the consumer council, told news bureau NTB before the historic case began. “Fees that are too high can quickly eat up lots of people’s retirement savings.”

More pipeline problems, too
It’s the latest in a long string of complaints against DNB, and follows more bad news for the bank earlier this month. That’s when state broadcaster NRK’s Radio Sami revealed that despite DNB’s claims that it had pulled out of the controversial Dakota pipeline project in the US, it still carries loans it made to four of the five companies behind the pipeline’s construction. Norway’s indigenous Sami people had backed fellow indigenous groups in the US that have battled the pipeline, claiming it will run over sacred land and pollute their water supplies.

DNB has defended the loans to the companies because of its role as a “large energy bank,” and maintains that it no longer has “any direct exposure to the financing of the pipeline itself. Environmental organization Greenpeace isn’t buying DNB’s argument, told NRK that it was ending its own banking relationship with DNB and urged others to do the same.

“DNB’s mess regarding the Dakota Access Pipeline is an important reason that we no longer want any banking connections with them,” Greenpeace leader Truls Gulowsen told NRK. “We are very disappointed that they still have loans to the companies behind the pipeline.” Berglund

  • richard albert

    There are a couple of things here that are quite worrisome. The first and most obvious being that people (allegedly) placed fiduciary trust in an organisation that seems to have kind of ‘blown them off’, despite some of the most intrusive regulation on the planet. Sue the bastards, but why did a supposedly exquisite system fail?.
    The second is the statement “Consumers are now expected to take steadily more responsibility for their pensions and how their savings shall be placed…” It may be ‘expected’, but I would be amazed if it actually results in any tangible benefit. Again, it sounds somewhat like tossing a drowning man both ends of the same rope.
    Equally troubling is the mentality that political/socio-ethnic withdrawals are going to somehow ‘defund’ a project on this scale. The sums involved are not that significant (e.g. GBP 45 Million from the KLP) and that vacuum is quickly filled by the cynical rich and Middle-Eastern and/or certain Asian interests. Human rights, anybody?
    If you think someone is doing un-nice things with your money, by all means pull out. I just cut up a credit card that was moderately convenient because their customer service isn’t. It may actually cost me. But the neither the KLP, nor I, will have any impact. Sleep better, yes.
    There has been a lot of chaff about DNB still holding loans to companies involved in the project. One cannot simply ‘cancel’ a lending contract, absent default, regulatory intervention, or fraud on the part of the borrower. Most such loans are difficult and expensive to novate, and are generally sold at discounted rates to bottom-feeders. Will this really improve the situation?
    Finally, the issue of protest – both in the form of legal action, and taking to the streets. The track record of successful litigation is dismal. Millions to litigators, pittances to litigants. Moreover, the result of civil protest is difficult to calibrate. Gandhi may have been a jerk privately, but his program is legendary. Unfortunately the destruction wrought of subsequent riots and civil disobedience, spinning out of control, has debased the coin. Increasingly, such activities are perceived as the machinations of ‘rabble’, and are commensurately counter-productive. I may imagine Old Gandhi spinning in his nirvana at the pointless sub-juvenile rant and burning of Oakland. Protest a free election?

    So, Dickie – what’s your point?
    Simple: before you assemble the parade, build the floats, muster the horses, strike up the band, and throw candy to the children, just make sure that you are not walking up a dead-end street.