My finance view

The Icelandic government said Monday that it has taken control of the struggling Glitnir bank, marking the first major banking nationalization for the country in the current turmoil.

The government said it bought a 75% stake in Glitnir, the country’s third largest bank, for €600 million euros ($878 million) to ensure broader market stability after it suffered liquidity issues.

Central Bank of Iceland chairman David Oddsson said that Glitnir, which has operations in 10 countries, would have collapsed if the authorities had not intervened.

However, the government said that the bank would continue to operate as normal and that it does not intend to hold its share "for an extended period."

Glitnir itself stressed that its core operations "are solid."

"The board and management of Glitnir have diligently worked at securing the bank’s funding in the past months’ turbulent markets, but unfortunately the bank saw adverse development in the past few days," said Glitnir chief executive officer Larus Welding, who will remain in his position.

"Having the government as an owner strengthens the capital base of the bank and removes all doubt about Glitnir’s financial strength," he added.

The Financial Supervisory Authority said that Glitnir’s capital and asset portfolio is solid and its loan book of good quality payday advance. The capital adequacy ratio will be 14.5% after the government’s action, it said.

Glitnir said that the offer was posed Sunday meeting and the bank’s board voted to accept the proposal at a meeting Monday morning. The bank now plans to call a shareholder meeting to approve the deal.

Trading in Glitnir shares was halted on the OMX Nordic Exchange. 

Source

Peace. Love. Hockey.

It’s not a theme typically associated with Canada’s national pastime, but two savvy Markham hockey moms have a decidedly different take on the sport they know and love, especially as it relates to chicks like them who play the game.

Puck bunnies they’re not. But these sisters-in-law wear their hearts, along with tongue-in-cheek slogans, on their sleeve when it comes to their perspective on the sport. And Lori and Cindy Nickerson’s goal these days is to shoot for the often forgotten feminine side of the casual hockey apparel and accessories market.

Sticking it to the man, so to speak, is at the core of their über cool clothing line simply called She Plays Hockey, since their years at the rink both playing and watching their kids play led to the discovery that girl-friendly gear – from hats to hoodies – was surprisingly scarce.

"Initially, we were sick of not being able to find clothing that represented girls who play the sport. There just wasn’t much stuff out there," explains Lori Nickerson.

"Girls that play hockey are girls, not boys. And we have our own attitude toward it," adds Cindy Nickerson.

They made tonnes of calls, asked a million questions and did their research, identifying a void in a niche market of the sports apparel industry that has until recently been overlooked. Their gear is meant more for off the ice or to wear out of the locker room as opposed to the more technical side of manufacturing equipment.

As it turns out they were on the right track, considering girls’ and women’s hockey has absolutely exploded in popularity over the past couple of decades. According to website hockeycanada.ca, female hockey across Canada has grown from 8,146 girls and ladies registered to play on a team in the 1990-91 season compared with a record 73,791 last year.

It appears to get the biggest boost in interest after each Winter Olympics. The first time women’s hockey was featured in the 1998 Winter Games in Nagano, Japan – in which the Canadian women’s team won silver – enrolment on recreational girls teams in Canada shot up by a remarkable 30 per cent that year.

Vicky Sunohara, who played centre for that team and again for Canada in the following two gold medal-winning Olympics in 2002 and 2006, is a big fan of the statement She Plays Hockey makes in both fashion and feminism, albeit with a lighthearted twist.

"They (the Nickersons) were selling their clothing at a hockey camp I was running in Whitby and they gave us the hoodies. They both play so they’re very passionate about the game," she notes.

Sunohara recalls girls’ hockey wasn’t very popular when the now 38-year-old was growing up in Scarborough, so there wasn’t much to choose from beyond oversized guys’ jerseys, although she got all the Peter Puck logo shirts she could get her hands on back then.

In fact the market has always catered more to girl figure skaters than to female hockey players, she says.

"A lot has changed in terms of women playing the sport. I think it’s cool that the apparel and their unique sayings are directed toward the female game," she says.

Cindy Nickerson, a forward on a women’s recreational team in Stouffville, is the creative force behind the cute expressions on their gear like "Sugar & Spice, but not on the ice", "You only wish you could play like a girl", "My goal is .. quick payday loan. to deny yours", "Peace. Love. Hockey" and "Pretty to look at, hard to catch".

"We want it to be empowering," she says.

Cindy does most of the research whereas Lori, who plays defence with another recreational team in Scarborough, is the business brains of the operation, doing the budget and the books since they started out three years ago in her basement.

The two are married to brothers and live about a five-minute drive from each other in Markham. They each have three kids, although five of six are boys.

The hockey-loving duo started out small, plugging their colourful, cuffed toques and T-shirts at various girls’ and women’s tournaments at arenas in the GTA.

"Three years ago we were cold calling hockey tournament organizers begging for an arena to sell at. Now our appearance is requested, but unfortunately we have had to turn down more than we can accept because of time constraints and family commitments," explains Cindy, whose 6-year-old daughter and 10 and 12-year-old sons are way into the sport.

But they’re hoping to grow the business now that her job in tech support is being outsourced overseas and Lori’s youngest son is now in school. They’ve had nibbles from local retailers, big and small, and are hoping to get their foot in the door with more of the independent sports stores and move up from there.

Word-of-mouth has helped them enormously. They’ve also managed to keep every aspect of the business local, from graphic design to manufacturing, with the `made in Canada’ branding almost as important to them as the ‘girl-power’ message.

"I came across the clothing line through a fellow Oakville Hornets’mother," says Mitch Maurice, wife of former Leafs’ head coach Paul Maurice and mom to 11-year-old peewee-level player, Sydney.

"There was an in-home sale of the items just before Christmas and I figured I’d look for a few unique things for my daughter. I like the quality, affordability and uniqueness of the products and she loves the colours, the mix-and-match options and the slogans. I’ll be checking at the rinks for the next opportunity to purchase some more," she adds.

Lori’s basement is now a storage space for their inventory, lined with dozens of clear bins packed with their trendy shirts, flannel pants, undergarments/long underwear, lunch bags and backpacks.

Naturally they all come in girl-friendly hues like baby blue, lime green and hot pink, along with regular shades, and are tailored for the female physique, as opposed to the baggy gear aimed at the guys that isn’t terribly flattering on the girls.

"The sayings are girlie and the logo, She Plays Hockey, is simple but it’s memorable.

"We’re doing clothing for girls, both kids and adults, but we’re not tomboys," says Lori.

Source

OTTAWA–The Bank of Canada has announced the second $2- billion liquidity infusion in the past week in an effort to unclog tight credit markets.

The central bank said Tuesday it will relax credit conditions for the chartered banks to borrow up to $2 billion for 84 days starting Sept. 24.

At the same time, it will roll over last week's $2-billion purchase and resale agreement for an additional 27 days once it expires on Oct. 17.

The bank said the measures are needed to support the efficient functioning of financial markets, and it will continue to provide liquidity as long as required.

Global financial markets have been in turmoil following the recent collapse of large Wall Street titans that became overexposed to the U.S payday loans. mortgage crisis.

The result has been that financial institutions have been reluctant to lend money, making it more difficult and expensive for businesses and individuals to borrow.

Source

Alitalia (AZPIa.MI: Quote, Profile, Research, Stock Buzz) will lose its operating license if a special administrator making a last-ditch attempt to sell the airline does not give Italy’s aviation authority a credible new offer or cost-cutting plan by Thursday.

Following the withdrawal of an Italian rescue bid because of opposition by pilots and cabin crew, the government-appointed administrator made a last attempt on Monday to attract offers, although previous bids to find a foreign buyer have failed.

Prime Minister Silvio Berlusconi’s spokesman Paolo Bonaiuti acknowledged that “buyers are not queuing up for Alitalia”.

Pilots and crew attempted to attract alternatives to the CAI consortium’s rescue bid on Monday by saying they would put up their own pay and pensions, totaling 340 million euros, “to back any serious, credible project for the relaunch of Alitalia”.

But so far, the only interest has been in the state-controlled airline’s heavy maintenance and cargo units as well as in leasing unused aircraft and laid-off staff fast cash. On Monday, Swiss investment firm AMA Asset Management Advisers said it was interested in buying or renting 30 Alitalia planes.

Flights continued as usual but Alitalia faces being grounded, and its assets liquidated, if there is no last-minute decision by dissenting unions to accept the job cuts and slimmed-down contracts that the CAI consortium had offered.

“Alitalia is flying with a provisional license,” the head of aviation body ENAC, Vito Riggio, told local radio ahead of talks with special administrator Augusto Fantozzi early on Monday.

He said afterwards that Fantozzi was given until Thursday to present “a report on the company’s prospects, any offers to buy it or a cost-cutting plan” in order to keep its license. 

Read more

Barack Obama urged the Bush administration and lawmakers to work quickly to craft a bipartisan plan to ease the country's financial crisis and avert economic “catastrophe.''

Obama echoed the concerns of congressional Democrats who are raising objections to elements of Treasury Secretary Henry Paulson's plan to buy as much as $700 billion in soured assets from financial firms. House Financial Services Committee Chairman Barney Frank called for limits on the pay of executives at companies that would benefit from government bailouts.

The Bush administration's proposal is a “concept with a staggering price tag — not a plan,'' Obama said.

Obama, speaking today to about 25,000 people at a rally in Charlotte, North Carolina, repeated his call for the rescue plan to put the interests of average Americans at the top of the agenda.

Solutions must address not just Wall Street, “but also the crisis on Main Street and around kitchen tables,'' Obama said. “In return for their support, the American people must be assured that the deal reflects the basic principles of transparency, fairness and reform.''

“There must be no blank check when American taxpayers are on the hook for this much money,'' said Obama. “Taxpayers shouldn't be spending a dime to reward CEOs on Wall Street while they're going out the door.''

`Grave Mistake'

Frank, Democrat of Massachusetts, said it would be a “grave mistake'' not to include limits on executive compensation. Paulson called such a measure “punitive.''

Frank is also seeking authority to oversee and audit Paulson's rescue program. He has proposed that the U.S. Comptroller General would “commence ongoing oversight of the activities and performance'' of the plan and of “any agents and representatives'' of the initiative, according to legislative language presented to Treasury officials today and obtained by Bloomberg News.

Paulson yesterday asked Congress for unhindered authority to buy devalued mortgage-related securities from investment firms in an effort to keep the financial system from coming to a standstill. The proposal would prevent courts from reviewing the Treasury's actions while raising the nation's debt ceiling to $11.315 trillion from $10.615 trillion.

Obama continued to attack his Republican rival, Arizona Senator John McCain, by trying to link his support for Bush administration economic policies to the current crisis no fax payday loans.

Journal Article

Obama also repeated his criticism of McCain writing in the current issue of Contingencies, an actuarial journal, that he supports “opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking.''

“That's right, John McCain says he wants to do for the health care system what Washington has done for banking,'' Obama said.

McCain's senior economic adviser, Doug Holtz-Eakin, yesterday called statement “absurd'' and misleading.

“If Barack Obama thinks that today's financial troubles were caused by policies which allowed Americans to use an ATM anywhere in this country, then it is better that he continue to be silent about solutions to the crisis on Wall Street,'' Holtz- Eakin said in a statement.

“It's also possible Senator Obama is simply a dishonest politician who will say anything to get himself elected and just isn't ready to be president,'' he said.

Obama continued to pitch his message that McCain would keep the country on the same path forged by Republican President George W. Bush.

`New Driver'

“If your car is in a ditch you don't want the driver who thinks we should take the same path that got is in the ditch,'' Obama said. “You want a new driver who has a better sense of direction.''

The McCain campaign today said Obama offers “absolutely no new ideas, policies or concrete solutions.''

“It shows he is just not ready to lead,'' McCain spokesman Tucker Bounds said in a statement. “We cannot afford a directionless driver like Barack Obama.''

McCain, in a Baltimore speech at a National Guard convention that dealt largely with military preparedness issues, cited his proposal to create a new government entity to identify bad loans and eventually sell them, while criticizing Obama for not advancing his own proposals to deal with the crisis. The Illinois senator has said he preferred to see what the Bush administration is proposing first.

Source

SUNSET HILLS — Steve Carani popped on his headset. This would not be a pleasant phone call. He had to tell a client that the value of her $10,000 Lehman Brothers bond had deteriorated after the investment bank’s massive bankruptcy on Monday. For now, it might be worth pennies on the dollar.

"Nobody’s going to have the exact answer as to what happened for some time," Carani told the client Friday. "I’m sorry it happened."

At the end of one of the craziest and scariest weeks on Wall Street in recent memory, financial pros are taking stock and trying to regroup, facing a suddenly changed financial services industry. For Carani, a financial advisor with 16 years at Edward Jones, that means reassuring clients that this is no time to panic.

This is one of the most volatile markets some professionals have ever seen. Stocks plummeted Monday and again Wednesday as many credit markets around the world stopped functioning normally and investors ran for cover. "This financial crisis might be the worst we’ve had in 70 years," Ron Kruszewski, chairman and CEO of St. Louis-based Stifel Financial Corp., said Monday, after the Dow Jones industrials dropped more than 500 points.

On Thursday and Friday, the market picked itself up off the floor; big rallies underscored that investors had craved: the federal government’s interventions on behalf of stumbling mega-insurer AIG and firms holding degrading mortgage-backed securities.

"The way the market responded (Thursday and Friday) points out how extreme the fear was," said Al Goldman, chief market strategist at Wachovia Securities. "Investors were thinking we were facing financial Armageddon."

On Monday, Carani had to call dozens of clients to tell them that Lehman — with an investment-grade credit rating just weeks ago — was bankrupt, threatening their bond investments. It may have been the toughest day in his career and "by far" the roughest patch this week, he said.

Brokers and analysts fretted that fear, angst and uncertainty had become the primary factors in pricing securities this week, superseding fundamentals like valuation and future prospects. Safety seemed elusive. Destructive chain reactions seemed possible. "You’re looking at a range of emotion that is occurring in a short amount of time, which can be emotionally exhausting," said Richard Cripps, chief investment officer at Stifel Nicolaus.

At 7:00 Tuesday morning, a client called Carani’s office and left a message. "Tell Steve to sell everything. I want out."

In a 20-minute phone call, Carani was able to talk the client back from the brink. His mantra: prudence, diversification, patience — the old bedrocks of conservative investing.

 Radical rescue: Hundreds of billions for bailout

 Local bankers say Paulson had to act on “bad” assets

 NICKLAUS: In the short term, we are all going to be socialists

 NEWSWATCH: How much is TOO MUCH?

 NEWSWATCH: Will bailout help housing market?

 Wall Street ends wild week with biggest two-day rally in 38 years

 Area financial advisers survive storm

 STROUD: Market turbulence can test your level of risk tolerance

 Missouri regulators reassure AIG policyholders

 Credit market remains tight, but avoids collapse

"Getting (investors) to hang on and stay intact — sometimes that’s the best strategy," said Carani, who oversees 70 brokerage offices.

Great opportunities open up for investors during times of crisis, said Goldman paydayloans.com. Unfortunately, he said, most people can’t bring themselves to buy stocks when the market is in a downturn and stocks can be had for a bargain.

"I’ve been doing this for 48 years, and two days ago, I thought I was going to lose my lunch," Goldman said Friday. "When my stomach acid rises to the point where I’m thinking I might lose my lunch, I know that’s when to buy stocks."

Experts stressed that the market could handle the strain, advising investors to keep an even keel and not to overreact either by dumping solid investments or piling into unsteady ones. For all of its travails, the market closed at the same level on Friday as it stood a week before. The Dow Jones industrial average is basically flat for the month. "The reality is, we’re not going to spontaneously combust," said Cripps.

Things had calmed down by Friday afternoon at Carani’s brokerage, tucked in a building near a coffee shop and sub cafe. Carani, dressed in a yellow tie festooned with small bulls — optimism? — said he would be on an anniversary trip most of next week. He might not even bring his laptop.

A 74-year-old client came in to discuss her investments in Fannie Mae, Freddie Mac and Anheuser-Busch. "I’m not really getting panicky" about the market, she said. "If you panic and start selling, that’s when you’ll really get in the hole. You know, last week when things were down, I thought, ‘I wish I had some extra money so I could buy some of this low-priced stock!’"

jmcwilliams@post-dispatch.com

314-340-8372

Source

NEW YORK — The state is launching an investigation into whether some traders used illegal tactics to drive down the stock price of several Wall Street firms.

Attorney General Andrew Cuomo told reporters Thursday that his office has received a "significant number" of complaints about short sellers, or investors who hope to profit by placing bets that a financial company’s stock will fall.

Short-selling is not illegal. But Cuomo said he will focus on whether short sellers engaged in conspiracy or spread rumors and bad information to influence the stock prices of Lehman Brothers Holdings Inc., American International Group Inc., Goldman Sachs Group Inc., Morgan Stanley and others.

Short-selling occurs when traders borrow shares of a stock they expect will fall and sell them cash advance loans. If the stock does indeed fall, the traders buy the cheaper shares to cover the borrowed ones and profit from the difference.
Naked short-selling occurs when sellers don’t actually borrow the shares before selling them. It’s a practice some say is partially responsible for the huge drop in the shares of investment banks such as Lehman, Merrill Lynch and Bear Stearns Cos., which JPMorgan Chase & Co. bought this year.

Cuomo said he believes the federal government has been "ineffective" in dealing with short sellers and said his office would go after traders found to be illegally using the practice to manipulate markets.

On Wednesday, the Securities and Exchange Commission a

The nation’s financial system is in the midst of a massive shakeup and many on Wall Street and in Washington are pointing fingers and looking for someone to blame.

But in the end, it all comes back to one issue - housing.

Earlier this decade, it was much easier to get a mortgage. Home prices soared about 85% from 1996 through 2006 in inflation-adjusted dollars, creating a bubble.

Then the bubble popped. And the fallout isn’t over yet, experts say.

In the past two weeks, the government took over Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), Lehman Brothers (LEH, Fortune 500) filed for bankruptcy and Merrill Lynch (MER, Fortune 500) sold itself to Bank of America (BAC, Fortune 500).

If all that weren’t enough, the Federal Reserve announced late Tuesday night that it was loaning $85 billion to insurer American International Group (AIG, Fortune 500).

None of this would have happened if the housing market had not imploded, leaving all these firms with staggering losses from their investments tied to mortgages.

"These institutions, which weathered all kinds of calamities before, including depressions, are being knocked out," said Lakshman Achuthan, the managing director of the Economic Cycle Research Institute. "It’s a testament to the significance of the problem we have here."

Thus, experts agree that there are likely to be future shocks to the financial system until the housing market finally hits bottom.

Even Treasury Secretary Henry Paulson, the administration’s point man in the many rescue discussions of the past month, admits this.

"The housing correction poses the biggest risk to our economy," Paulson said the day he announced the Fannie and Freddie seizure. "Our economy and our markets will not recover until the bulk of this housing correction is behind us."

But because of the depth of the housing problems, it may take a long time before real estate prices head higher again. Here’s why.

Home prices, while sharply off from the 2006 peaks, are still high in comparison to long-term gains in income, rents or overall prices, suggesting that they still have a way to fall, according to experts.

The reason housing is wreaking havoc even on insurers like AIG and big investment banks, who do not make mortgage loans, is that during the boom, trillions of dollars of mortgages were packaged together into securities that promised to pay investors with the proceeds of those loan payments.

Those securities paid better rates than other types of assets during the boom years. So many investors from around the globe poured as much money as they could into those securities.

Faced with this demand, lenders starting making more loans to riskier borrowers, including people who might not be able to afford their mortgage payments in the future and even many with no proof of income.

When prices were rising, this wasn’t a problem quick payday loans. The risk of loan foreclosure or default was limited because many homeowners were able to sell their house for more than they owed and make a profit.

But once prices topped out and began falling, loan defaults and foreclosures started shooting higher as homeowners found it more difficult to sell their house. This created problems not just for subprime borrowers but even for those with good credit and income.

When foreclosures rose, the value of the various types of securities tied to mortgages started to fall, causing huge losses up and down Wall Street. It also made banks less eager to extend credit because of the risks involved.

This credit crunch in of itself slowed the economy, leading to job losses and more defaults, feeding a downward spiral that has been difficult to stop.

"A really bad situation — a home price bubble bursting — was made significantly worse when the recession began," said Achuthan. "Now we have to let this thing play out."

Some experts even argue that the steps being taken to rescue firms like AIG could make a recovery in housing and the broader economy more difficult, as financial firms and investors become more reluctant to lend money.

"We are certainly taking credit and squeezing it tighter and tighter," said Kevin Giddis, managing director of investment bank Morgan Keegan. "Housing needs buyers. Buyers need credit."

Achuthan said that even though rates for mortgages and other types of loans have fallen in the last two weeks, those loans are becoming more difficult for many consumers and businesses to get because banks are severely tightening their lending standards.

And if housing prices do fall further, that will only cause more losses in the financial sector and perhaps more failures of banks, insurers and securities firms.

"I would hesitate to say the worst is behind us," Achuthan said.

So even with perhaps hundreds of billions of tax dollars going to AIG, Fannie and Freddie, one expert said the only real solution to the housing problem is for the correction in housing to finish running its course.

"We want home prices to return to normal," said Barry Ritholtz, CEO of Fusion IQ and author of the upcoming book "Bailout Nation."

"Until that happens, you can throw as much money at the market as you want at the situation….and it ain’t going to make any difference," Ritholtz said. 

Source

LONDON–Lloyds TSB sealed a rescue takeover of HBOS on Thursday to create a dominant British mortgage and savings bank in a $22 billion deal helped through by the government.

A change in competition law ensured the credit crunch did not claim another victim, after HBOS shares were battered in the past week by fears it was struggling to raise funds in wholesale markets.

The focus on HBOS came as other banks around the world staggered under the weight of the crisis and recalled the state bailout of UK bank Northern Rock in February.

Lloyds will offer 0.83 of its shares for each HBOS share, valuing them at 232 pence based on Wednesday's closing prices, or a 58 per cent premium. The deal values HBOS at 12.2 billion pound ($21.7 billion), only a quarter of its value a year ago.

By 1010 GMT, HBOS shares had jumped 44 per cent to 212p while Lloyds shares added 1 percent to 282.25p, nudging the value of the deal to 234p per HBOS share.

"We had expected HBOS would struggle to make a profit through 2010, but we had not expected it would fall victim to the credit crunch," said Sandy Chen, analyst at Panmure Gordon.

"The spectre of another run on customer deposits, combined with the run on wholesale funding that HBOS has been experiencing, was what pushed HBOS into the arms of Lloyds TSB, with the support of the UK government," Chen added.

Lloyds said it expects the deal to boost annual earnings by over 1 billion pounds a year by 2011 through cost savings and boost its earnings per share by over 20 per cent a year.

Cost savings could be even higher and the company may be playing down prospects to avoid a backlash about job and branch closures, analysts said.

Lloyds CEO Eric Daniels will remain as chief executive and Victor Blank will stay as chairman. Other positions, including that of HBOS CEO Andy Hornby, have not been decided.

Lloyds investors will own 56 per cent of the enlarged group.

The UK government said it intends to smooth regulatory approval of the takeover – despite the enlarged group having a 28 per cent share of mortgages – to ensure the stability of the UK financial system credit reports. Alistair Darling, UK finance minister, said he fully supported and welcomed the deal.

Lloyds has courted HBOS previously but regulators in the past would not have allowed a bank with such big positions in mortgages, current account and savings.

The credit crunch has changed that. Darling said the government would change legislation to modify competition laws so that the deal can go through.

Bruno Paulson, analyst at Bernstein, said it left "the UK's banking competition policy in tatters."

"A year ago it would have been very difficult for this deal to have gone through, but we live in unusual times," Daniels told reporters on a conference call.

But he denied it was a government-brokered rescue and said the banks have been in talks for several weeks.

"There shouldn't be any impression this is a shotgun marriage or a forced marriage, this is something that's been looked at for a good long while," he said.

Lloyds said the combination will strengthen its ability to serve UK customers in the current difficult markets.

But it will cut the bank's capital cushion and leave it more reliant on wholesale funding, so there are risks, analysts said.

Lloyds' core tier 1 capital ratio – a key measure of financial strength – will fall to 5.9 percent due to the deal, below the 6 per cent regarded as comfortable.

Daniels said he would target a ratio of between 6 and 7 per cent and will pay this year's final dividend in shares, rebase the dividend next year, and consider asset disposals on top of the cost savings to achieve this.

He declined to comment on what assets could be sold. HBOS's Australian arm Bankwest could be among the businesses on the block, analysts have said.

Daniels said reports that the deal could result in 40,000 redundancies "sound very much on the high side."

Merrill Lynch, Citigroup and Lazard advised Lloyds. Morgan Stanley and Dresdner advised HBOS.

Source

An Ontario judge has ruled that Bell Canada Inc. has improperly collected millions each year from satellite television customers who are late paying their monthly bills.

In a decision handed down late yesterday, the Ontario Superior Court of Justice sided with a class action suit that claimed a $25 “administrative” fee charged to Bell ExpressVu customers who were more than two months late paying their bills amounted to a criminal rate of interest.

The law in question prohibits annual interest rates in excess of 60 per cent and was originally intended to target loan sharks.

“This goes beyond Bell,” said Paul DeWolf, the suit’s representative plaintiff, in an interview today.

“If this ruling holds, a lot of companies are going to have to reassess their positions.”

DeWolf lives in Braeside, Ont., near Ottawa, and works for Metroland Media Group, a company owned by the Toronto Star’s parent, Torstar Corp.

The class action was launched on behalf of some 33,000 current and former ExpressVu customers that pay the late charge each month. The satellite TV service has about 1.7 million subscribers in total.

Bell, which is expected to appeal the ruling, had unsuccessfully argued that the administration fee reflected the costs it incurred when a customer’s account remained unpaid for two months.

The fee is on top of a monthly interest rate of 2 per cent charged by Bell on overdue amounts free credit report instantly.

The next stage of the class action will be to determine damages.

The original suit demanded ExpressVu cease the practice and repay the money collected since 2003 or, alternatively, pay $100 million in damages and another $10 million in punitive damages. However, most class action suits are settled for far less than the damages originally claimed.

DeWolf said he still expected damages to be in the “tens of millions.”

According to court documents, De Wolf failed to pay his bill by the due date on 47 occasions between January 2001 and May 2006, racking up $226 in “administration” fees.

That means De Wolf failed to pay his bill by the due date nearly 80 per cent of the time, a dismal track record he attributed to poor postal service to his small community and Bell’s billing cycle.

The ExpressVu ruling comes amid other class actions targetting the Canadian telecommunications industry, including one that focuses on the so-called “system access” fees charged by the country’s wireless carriers, including Bell. A Saskatchewan court certified the class action last year.

Another class action, which has yet to be certified, targets the emergency 911 fees charged to wireless subscribers.

Source