The banks must pay back billions

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DnB NOR’s sale of two loan-financed structured savings products was contra to sound business practice, according to a statement issued today by the Norwegian Bankklagenemnda. This means that the bank must pay customers back everything it has earned on the loans – charges, interest and commission. The loan agreements will also be null and void.

John E. Andersson Kommunikasjonsrådgiver forbrukerpolitikk, 13.10.2009 09:40

“This statement means that the banks will have to clean up their act and pay back,” says Randi Flesland, Director of the Norwegian Consumer Council. “The product was simply not good enough from the customer’s point of view and should not have been sold. Customers will be protected,” affirms the Consumer Council’s Director.

14 billion in losses

Formally, the statement issued by the Bankklagenemnda (complaints board for consumers in banking and financial matters) concerns a single complainant and two products, but the case is of public importance and will have significance for many more: in the past few years, Norwegian customers have borrowed NOK 38 billion to finance structured savings products.

According to a report on structured savings products issued by the Financial Supervisory Authority of Norway on 1 January 2008, borrowings reached a provisional peak in the 2nd quarter of 2006, when outstanding investments in Norwegian banks stood at NOK 50 billion. By the turn of the year 2006/2007, the banks had lent NOK 34 billion for investment in structured savings products. The personal finance magazine “Dine Penger” estimates that customers have lost around NOK 14 billion on this type of loan-financed product in the past few years.

The statement by Bankklagenemnda is a clear and unequivocal victory for those consumers who have purchased structured savings products: “The complainant is entitled to be placed as though the investment agreements and loan agreement had never been entered into,” was the decision of the majority of Bankklagenemnda members. The minority, consisting of the two representatives from the banking industry, believe the banks have acted in accordance with sound banking practice – and that the borrowers are obligated under the contracts they signed.

“The first thing customers should do now is to complain to the bank and other credit providers – and then to the Bankklagenemnda,” is the advice to consumers from Jorge B. Jensen, Deputy Director of the Consumer Council.

“The statement says that if you have bought this type of product, the contract is null and void. The products were not good enough. Complain in writing as soon as possible. You will find a standard complaint letter on our website at forbrukerportalen.no,” advises Jorge B. Jensen.

Expects the banks to comply with the decision

“The banks normally comply with the Bankklagenemnda’s decisions. They have a social responsibility to live up to. We expect them to do that this time, too,” says Jensen.

“If not, we are willing to pursue the matter and to support those consumers mentioned in the statement, no matter how long it takes through the civil legal system,” adds Jorge B. Jensen.

“This statement means that the banks will have to clean up their act and pay back,” says Randi Flesland, Director of the Norwegian Consumer Council. (Foto: CF Wesenberg/Kolonihaven)