Within a few years HSBC admitted they did not do their homework when it came to Household International, although at the time they insisted the performed due diligence. When consumer watchdog organization Household – HSBC Watch (see more) wrote opposition letters protesting the buyout of Household International by HSBC, attorneys representing HSBC downplayed or disputed key points made by Household – HSBC Watch. This month many of the issues raised remain unanswered although may seem to have haunted HSBC. From 2003 until the present HSBC failed to change attitudes, policies, and predatory lending at what is now called HSBC Finance.Most disturbing to advocates, watchdog organizations, and most consumers is the nature of complaints relative to HSBC Finance. Complaints of 2007 read like complaints of 2003. So called changes mandated by the states, relative to Household International’s record $484 million (USD) settlement of predatory lending charges, did not change much at all. Instead HSBC used the knowledge gained as a means to tighten already oppressive legal contracts with borrowers, insulating HSBC even more while maintaining the same attitudes and failed logic prior to 2003.
Years ago William F. Aldinger, then CEO of Household International, opined that people would do anything to avoid losing their house or their car to either foreclosure or repossession. Intelligent minds suggest that if a bank or finance company is fair with the customer a good relationship could prevail. Unknown to borrowers was that Household International applied daily interest, huge fees, and oppressive penalties in an attempt to garner huge profits. Doing so eventually led to charges of predatory lending. HSBC purchased Household International shortly thereafter, and in fact had a business relationship with Household prior to the sale. But Household already added predatory credit card models to their portfolio prior to being purchased by HSBC, and questions remain about HSBC knowledge of how predatory the terms and conditions of said credit card contracts actually were. By 2004 HSBC knew very well that their new HSBC Finance staff was applying credit card payments as “late payments” even though such status was dubious at best. The settlement cost HSBC $11 million (USD).
No doubt Household International under William F. Aldinger was headed to financial ruin or bankruptcy. HSBC thought they were buying Household International for a good, albeit devalued, price. In the early years HSBC showed a small profit because they themselves financed debt for their new acquisition at a lower rate than financially troubled Household International could get on their own. Smoke and mirrors, said the experts and consumer advocates. Complaints to Household – HSBC Watch continued to flow, many reflecting complaints seen as far back as 1994. From Canary Row HSBC failed to see that finding one’s customers through refund lending, merchant credit cards, or high interest auto loans did not bring the caliber of customer HSBC was used to. Was their focus on international credit card operations or was it on home loans? While HSBC bragged about their “Household Model” and exportation of said model to other countries around the globe, the truth remained that HSBC was losing money from said predatory model.
HSBC Finance Corporation, and therefore HSBC USA, continues to profit from abuses perpetrated as outlined in Shea v. Household and the aforementioned $11 settlement. Customer’s payments are not late. Second mortgages are overly oppressive and treated like credit cards. Tax refund anticipation loans take a percentage of government aid to children and give it to HSBC. Reports of HSBC abusing the U.S. military continue, both unabated and unanswered. Clearly the OCC, FTC, and all 50 states have enough evidence to take some action. Today HSBC must answer to shareholders for dismal profits. If a percentage of those profits were of a dubious nature to begin with, one must ask what will happen next. Will HSBC soon defend more charges of predatory lending or perhaps more serious charges of racketeering under RICO? Remember, in October 2002 many experts said others would not sue Household International, but would wait until HSBC owned Household. HSBC has deep pockets, while Household International under William F. Aldinger was in deep trouble. With four more years of evidence to acquire during discovery the future of HSBC in the United States could soon be much worse.
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