Antilla: Debit-Card Pitchwoman Orman Flirts With Conflict

Illustration by Joel Holland Close

Illustration by Joel Holland

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Illustration by Joel Holland

Suze Orman, the ubiquitous guru of personal finance, released a new book on Jan. 10, and her fans couldn’t part with their $16 a copy fast enough. In less than two weeks, “The Money Class” rose to fourth place among paperback advice books on the New York Times best-seller list.

That Orman’s latest work would be a winner was predictable. It is her 10th best-seller catering to an audience that has come to trust and even idolize her. Less predictable was what readers saw when they got to page 24: a shameless tout for Orman’s own branded Approved Card, a prepaid MasterCard debit card that she had introduced a day before the book came out.

On page 156, readers were hit with another plug, this one for an investment newsletter that describes Orman as “Chief Navigator.” Orman wrote that she would give “something special” to readers: a free 12-month subscription to the Money Navigator newsletter, which otherwise would cost $63 a year. The pitch took up the entire page.

Orman, 60, has achieved unrivaled status as a financial advocate for the public. In her books, columns, television shows and personal appearances, she preaches a common-sense gospel of reducing debt and living within one’s means. The people inspired by her benevolent badgering learn the minutiae of everything from checking accounts to life insurance.

Orman was twice named to Time magazine’s World’s Most Influential People list, and has shows on CNBC and on Oprah Winfrey’s cable-television network. For addressing the needs of the little guy and gal, she has been rewarded with wealth and fame. It just isn’t so clear whether her own interests don’t get in the way of the interests of her disciples.

Card Fees

Through her spokeswoman, Jill Zuckman, Orman declined to respond to a list of questions.

“Suze is very proud of her work to create the Approved Card and she is gratified by the overwhelming response to the card and her effort to overhaul the way credit is scored in this country,” Zuckman wrote in an e-mail statement. “We’re going to let others debate the questions that you raise.”

Orman’s card costs $3 a month plus other fees. She has said she hopes that FICO credit scores will one day reflect consumers’ use of prepaid debit cards, which might help less- affluent people who don’t have bank accounts. With that goal in mind, she will share anonymous information with TransUnion Corp., a credit-tracking company, about users who agree to be part of a pilot program. As of now, data from prepaid cards doesn’t figure in credit-score calculations.

After her debit card’s debut, Orman got slammed by critics who wondered how she could responsibly peddle a product that will generate income for her while she’s evaluating competing products.

She responded at first by insulting New York Times columnist Ron Lieber and others, then was shamed into an apology on Twitter.

“For anyone I called an idiot I too am sorry,” she posted on Jan. 11. Two days later, after a National Public Radio host asked about criticism of her card by an online credit-card research site, Orman was back at it. “He was an idiot,” she said of the author of the analysis, who had pointed to “marketing fluff” and the number of fees associated with Orman’s card.

While there’s a lot of fuss right now about Orman flogging her new card, it isn’t the first time she has pitched personal- finance products. Orman sells a $14.99-a-month identity-theft protection product called Trusted ID, which employs a decidedly consumer-unfriendly policy: Buyers must agree to use arbitration in the event of a dispute.

Investment Newsletter

The Money Navigator came under fire last month in the Wall Street Journal, which unearthed inaccurate performance claims by her partner in the newsletter, money manager Mark Grimaldi. The errors were corrected. Grimaldi didn’t respond to requests for an interview.

Another product, the Suze Orman Must-Have Documents package (“A $2,500 value!”), includes forms for a will, revocable trust and powers of attorney. It sells for $29.95 on her website, www.suzeorman.com, though she sometimes offers the kit for free on her television shows.

In December, a woman who purchased the kit in 2009 for $15 filed a complaint against Suze Orman Media Inc. in a Missouri circuit court. She is seeking class-action status on behalf of Missouri residents who bought the kit, alleging that Orman’s company engaged in the practice of law without a license. Orman Media hasn’t yet answered the complaint.

Although Orman wouldn’t discuss the conflict-of-interest questions with me, she did get into it in a video that was posted on AOL. Orman told Arianna Huffington that she would make a point not to talk about her card on her weekly CNBC program, “because that is my platform where I educate you.” From now on, if you’re a consumer with a question about prepaid cards, “you’re gonna have to educate yourselves,” she said. But how do viewers or readers know which “platform” is the one where she’s educating them, and which are acceptable for pitching her products?

Readers of O, the Oprah Magazine, might like an answer to that. In her regular column in the February issue, Orman responded to a question from a mother wondering whether she should co-sign a loan for her son.

“I have to tell you,” Orman writes, “your son’s situation is one of the big reasons I’ve worked hard to bring out my new Approved Prepaid MasterCard debit card.” A sidebar that takes up more than a quarter of the same page further touts the card under the headline, “You Are Approved to Save Money.” Fourteen pages later, there’s a two-page ad spread for the Orman card. At least the ad is unmistakably an ad.

Do Your Homework

Alexandra Carlin, a spokeswoman for the magazine, in an e- mail wrote that Orman clearly states her involvement with the card and is proud of it.

“In this instance, as in all others, we feature service information that we know to be accurate, that supports our editorial mission, and that we believe our readers will find useful -- they are free to determine whether the advice or suggestions are right for them,” Carlin wrote.

What’s an Orman fan to do? Orman herself might say do your homework and read the fine print, and here’s what hers says: www.suzeorman.com, a Web page that includes a comprehensive sampling of her investment, consumer and legal ideas, exists for “informational purposes,” offering neither tax, investment nor any other kind of professional advice.

Importantly, Orman’s disclosure notes that her company doesn’t hold itself out as an investment adviser, which would make it subject to federal securities laws.

Orman has been certified by the Certified Financial Planner Board of Standards, and has no public disciplinary history with the group. CFP rules require that a planner on television or in any other public venue not mislead anyone about the potential benefits of their service, said Daniel Drummond, CFP spokesman. Other than that, the standards that seem to apply are those of journalists, who are exempt from the Investment Advisors Act of 1940, provided that they don’t engage in a fraud, such as purchasing shares of a stock before writing favorably about it.

Robert Plaze, associate director of the division of investment management at the SEC, declined to comment about Orman. But he said the question that regulators and others have to grapple with in regulatory cases involving people who write newsletters or go on television is, “Who is a journalist?”

In Orman’s case, her role is hard to pin down.

Orman goes to pains in her disclosure to say she isn’t an investment adviser. O magazine calls her a “contributing editor,” which sure sounds like a journalist to me.

Meanwhile, Brian Steel, a CNBC spokesman, throws another possibility into the mix. Orman is “not a CNBC employee or a journalist,” he said in an e-mailed statement, but the network does have “editorial guidelines in place to insure that the ‘Suze Orman Show’ maintains its editorial integrity.” He didn’t respond to a question asking what the difference is between CNBC’s expectations of Orman and its standards for journalists, but did say that Orman will neither discuss her debit card on the show nor buy advertising time for it.

Making an Impression

Call her what you will, but Chris Roush, a professor of business journalism at the University of North Carolina at Chapel Hill says the public relies, in part, on the impression it gets.

“She comes across on her show as being a journalist who has vetted products and issues, and is speaking from a position of authority,” said Roush, a former reporter for Bloomberg News.

That impression can “keep the public confused” when the same news organizations that hire professional journalists mix things up with “fringe” people, said Kevin Smith, ethics committee chairman at the Society of Professional Journalists. Newsrooms generally have rules that prohibit journalists from selling financial products or trading stocks they’re writing about, Roush points out.

So much for my big plans for the Susan Antilla Broker- Vetter Kit, which would have been a steal at $9.99.

(Susan Antilla, who has written about Wall Street and business for three decades and is the author of “Tales From the Boom-Boom Room,” a book about sexual harassment at financial companies, is a Bloomberg View columnist. The opinions expressed are her own.)

Read more opinion online from Bloomberg View.

To contact the writer of this article: Susan Antilla at santilla@bloomberg.net.

To contact the editor responsible for this article: James Greiff at jgreiff@bloomberg.net.

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