It’s been the biggest class action lawsuit ever filed in Norway, and it was against Norway’s biggest bank, DNB. Now around 180,000 DNB customers have won their claim that the bank charged fees that were far too high, and their victory was being hailed Thursday as a victory for all consumers in Norway and even abroad.
“We are of course very glad we won, both on behalf of the consumer protection council, but also on behalf of all Norwegian consumers,” Inger Lise Blyverket, director of the council (Forbrukerrådet), told Norwegian Broadcasting (NRK) on Thursday.
The state consumer council had sued the highly profitable DNB three years ago, claiming it must refund around NOK 690 million in fees it had charged relatively small savers in its investment funds. Unhappy DNB customers, backed by the council, claim they’d been charged fees to cover alleged active management of the investment funds, when in fact the funds were managed passively.
The council argued that DNB had thus charged management fees for years, for a service the roughly 180,000 savers in the DNB Norge, DNB Norge I and Avanse Norge I funds did not receive. DNB had initially even tried to block the class action suit from going to court, but lost that effort back in June 2017. An Oslo County Court approved the class-action and DNB appealed, but the appeals court refused to hear it.
DNB later won in the Oslo City Court and claimed it had changed its marketing and management of the funds. The consumer council appealed. On Thursday the appeals court (Borgarting lagmannsrett) sided with the consumers and ordered the bank to refund every member of the class action 0.8 percent of his or her share of the fund from 2010 to 2014. DNB was also ordered to pay an amount equal to lost gains on their fund shares tied to the lack of active management.
That means DNB now faces paying out around NOK 345 million in total to the roughly 180,000 customers who sued. DNB also must pay around NOK 14.2 million in court costs.
Principle at stake
Blyverket, who now leads the consumer council, stressed the importance of principle tied to the appeals court’s ruling, which implies that banks can’t attempt to make up for past wrongs by simply changing future practice. “They have to keep their promises hear and now, and compensate customers who have paid too much,” Blyverket said. “That’s why it was so important for us to go to court and not just be satisfied that the bank had corrected former practice.”
Thursday’s appeals court ruling may have implications for funds customers in banks in other countries as well. “The problem with passive funds that are marketed as actively managed funds comes up in several countries in Europe,” Jorge Jensen of the council told NRK when the class action was first approved. The principle must be, according to the council, that fees charged for “active managment” must mean that the fund is indeed actively managed.
DNB still claims customers did receive what they were promised, and that a management team did select shares in which the funds invested. “The county court decided that we were right and the appeals court thinks the consumer council is right,” DNB spokesman Even Westerveld told NRK. He noted that the team didn’t manage to beat the index for the shares invested in, “and we’re not satisfied with that,” but the bank disagrees that it should now compensated customers.
“We believe these funds were actively managed and that there has been enough risk taken to achieve gains,” Westerveld said. “We will now go through (the court verdict) and see whether we need to appeal to the Supreme Court.”
He added that if DNB’s funds managers had opted for higher-risk investments, “it could have quickly resulted in lower returns” for the funds’ customers. “There’s no guarantee our customers would have been sitting with more money.”