Consumer Protection

Outgoing Goldman Sachs Director Criticises Firms Culture

The Age reports that former Goldman Sachs executive director Greg Smith has accused the firm of having a “toxic and destructive” environment, following his departure from the firm. Mr Smith, in an opinion piece, reportedly stated that Goldman Sachs had “dumped its old culture of helping its customers make money”, adding that staff call their customers “muppets” and talk about “ripping off their clients”. Mr Smith reportedly blamed the change on a shift in how the firm promoted its people, namely that if an employee made “enough money for the firm”, that employee would be promoted into a “position of influence”. The firm reportedly expressed disagreement with Mr Smith’s views and stated that “[Goldman Sachs] will only be successful if [its] clients are successful”.

The Age: Departing Goldman banker slams ‘rip-off’ culture (15 March 2012)
(Source: The Age)

Related article:
New York Times: Why I am Leaving Goldman Sachs (15 March 2012)
(Source: New York Times)

Disputes About Mortgagee Sales on the Rise
Asia Pacific

The Banking Ombudsman has received 34 new complaints in February 2012, up from 22 in 2011 and only 14 before the global financial crisis. Reportedly, complainants’ biggest grievance related to mortgagee sales, with complainants disputing “whether their houses should have been put up for mortgagee sale, and also how the banks managed the sale process”. Further, Banking Ombudsman Deborah Battell reportedly stated that “while investment-related complaints had dominated in previous years, now lending issues made up over half of all the complaints”. Bank complaints hit record high (9 March 2012)

Treasury Under Pressure to Probe Derivatives Mis-selling Scandal
Europe, Middle East and Africa

The Telegraph reports that the UK Treasury is under pressure to investigate the alleged “mis-selling scandal”, which has seen “hundreds of small businesses … buying complex and costly financial derivatives”. According to The Telegraph, the UK’s major banks, including Barclays, HSBC, Lloyds Banking Group and the Royal Bank of Scotland have sold highly complex interest rate derivatives to small businesses, including a fish and chip shop, care homes, garden centres, farms and hotels, many of whom do not understand these instruments. Reportedly, many businesses owners were liable to pay bills that worth “hundreds of thousands of pounds” when interest rates were cut to a historic low in 2009. An estimated £1.9 billion has reportedly already been paid to affected customers.

Reportedly, the UK Financial Ombudsman Service stated that it has received regular customer complaints regarding derivatives in recent months, with the Financial Services Authority stating it was aware of the issue. According to The Telegraph, in one case, a businessman who took out a £5 million five-year loan was left with a £4.1 million cost of terminating the 30-year swap that was sold alongside it. Treasury has asked the Federation of Small Businesses to survey its members with a view to finding out if the practice is widespread, and has also begun gathering evidence itself, reports The Telegraph.
The Telegraph: Call for inquiry into bank mis-selling scandal (11 March 2012)
(Source: The Telegraph)

Toy Dogs Recalled After Fur Scare
Asia Pacific

The New Zealand Commerce Commission (NZCC) has announced that the Dulux Group is voluntarily recalling over 100,000 promotional toy dogs in New Zealand and Australia which are at a risk of breaching the New Zealand Product Safety Standards (Toys) Regulations 2005 for children’s toys. The dogs were provided nationwide, through paint and hardware retailers, between 15 February and 9 March 2012. The NZCC found that “the toy might pose a choking hazard to young children as some of the toy’s fur can come away when pulled, sucked or chewed”, after launching an investigation following a complaint received about the fur of the toy dog coming loose and ending up in the mouth of a child. NZCC competition manager Greg Allan stated that the company has been “cooperative and responsive in stopping the promotion and recalling the dogs” and will therefore only be subject to low level enforcement action.
NZCC’s media release (14 March 2012)
(Source: Dulux Group)

ACCC Institutes Price-fixing Proceedings
Asia Pacific

The Australian Competition and Consumer Commission (ACCC) has announced that it has instituted proceedings in the Federal Court against travel agency Flight Centre Limited (Flight Centre). The ACCC has alleged that Flight Centre attempted to engage in price-fixing arrangements with competitors on six occasions by attempting to induce a number of airlines to “stop directly offering and booking their own international airfares (including over the internet) at prices less than Flight Centre offered”. A directions hearing is scheduled for 13 April 2012.
ACCC’s media release (9 March 2012)
(Source: ACCC)