It’s been a while since my last conversation with Carrick Mollenkamp of the Wall Street Journal. We were busy watching HSBC Finance for evidence of the old Household International. Carrick wrote an article on November 18, detailing subprime’s effect on HSBC Finance. It is interesting to discover that HSBC is still re-aging loans. While the practice once resulted in a cease and desist order from the SEC, apparently it is legal as long as the practice is disclosed and the amount of such loans is accurately and correctly disclosed. Re-aging, or putting more debt on the back end of the loan and pretending that the loan is current is no way to solve a problem.
Don’t think for a minute that re-aging is a pleasant situation for borrowers. Our complaints blog shows what really happens with a re-aged account. If a borrower asks HSBC Finance for assistance the borrower is told that they must be past due before discussions can begin. Read that correctly as “You must ruin your credit first.”
If the borrower does so, HSBC can re-age the account, thus making ti appear as though it is current. That ends any discussion because the account must be late, or past due. Does re-aging correct “late-30” or “late-60” entries on the borrower’s credit report? Of course not. Re-aging adds to the balance, places all past due amounts on the back end of the loan, and increases the payoff.
HSBC repeats the process as much as possible. First and foremost, the borrower is now definitely relegated to a subprime position. Secondly, HSBC theoretically has a higher balance and amount due, and has not allowed a “discussion” that could eventually result in a hardship, interest rate reduction, or otherwise intelligent solution to the problem. Re-aging is like insurance packing in that regard.
At HSBC Finance, it is like baking a turkey. Pack, add, stuff, inflate, and lick those juicy lips. For the borrower it is more like just being a turkey. That’s why the SEC issued a cease and desist in the first place. While Household International rolled over $1 billion in bad loans every month, HSBC was identified as the turkey willing to buy the broken down predator.
For an interesting professional look at current conditions at HSBC I recommend reading the article by CARRICK MOLLENKAMP and SARA SCHAEFER MUñOZ
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