Household HSBC Watch

Wed Jan 19, 2005 11:10 pm      

I know there are alot of you out there that agree.

I just found out, by HSBC's mistake, that this gripe is probably as common as I thought it was.

I am an 11-year attorney in Texas. Since paying off credit card balances a few years back, I rarely allow any balance to revolve anymore. My credit is spotless.

I go into Guitar Center (Houston) around the Christmas Holidays, 2003. I could pay cash, but there's all these banners "6-months, no interest" or "same as cash" - something like that. I spend a couple hours shopping and fighting the crowds before finally making a decision. I decide what to buy, and I'm going to go ahead and do the 6-month no-interest. I'll pay it off at the end of the promotion without incurring any finance charges. I also take 6-months no interest (which is in big bold print on banners and signs everywhere to mean just that - 6 months no interest).

The deal is done. The first statement comes. The purchase price is correct. No payment due. The second statement comes. No payment due. The third comes, etc. Each time, there is no payment due.

I would think I was acting pretty much like any ordinary person in believing that when HSBC finally tells me a minimim payment is due, I will know THEN to pay in full or suffer a ridiculous interest rate from then on - until I pay in full.

Not keeping track of whether 6 statements have been sent or what, it turns out I get (I think) the 7th statement. Now, I see FOR THE FIRST TIME a minimum payment due AND A BACKCHARGE FOR 6 MOS. INTEREST AT A RIDICULOUS RATE. Needless to say, I'm surprised and disappointed. I am also upset.

I call HSBC and speak to a rep. She was polite, yet stern. She reminds me that these statements all told me when I must pay in full to avoid finance charges. Apparently, if I would have "read" my statement, I would have seen this.

I disagreed, saying I believe HSBC actually employs the tactic to LURE the less wary into the trap of RIDICULOUSLY HIGH deferred finance charges for 6 MONTHS. She stands firm and gets a little aggressive with a few threats, so we end the conversation by me (with greater aggression) advising I refuse to pay the finance charges. I then write a check for the FULL amount of the PRINCIPAL ONLY and include notations that it is payment of the account IN FULL, included in the memo line, and a statement that indorsement constitutes acceptance as payment in FULL on the back.

HSBC cashes the check.

There were numerous collection calls. Basically, each collector was polite. However, I had to re-explain the same reason for my disagreement each time. It seems nobody ever made a log of the issue so the next guy at HSBC down the line would know what is going on. I finally got tired of going round-and-round with the same story falling on deaf ears. I wrote to HSBC to make clear that I am tired of the phone calls and having to repeat the whole story and why I will stand firm. I advise to cease contact by phone and not to *beep* with my credit report. Collectors still call. I am assured there is no adverse reporting with the bureaus, but have not verified it. I will take their word unless it becomes an issue later.

They still try to call. They leave a cryptic message, just identifying the name of the person (like "John" or "Sally") and to call an (800) number and an extension. They never say who they're with. I don't return the call. I could be wrong in assuming it's them. It could be a sales call from somewhere else.

Here's the kicker. I get a written response to my letter. It encloses copies of my statements (this time HIGHLIGHTED) to show me where I was told when the account should be paid in full to avoid getting ripped off. By the way, assuming you actually read this stuff, you still aren't really told STRAIGHT-UP that HSBC intends to BACK-CHARGE for 6 months of interest. It says "To avoid deferred finance charges, ..."

I don't get anything out of that other than what I thought in the first place, which is finance charges will be deferred for 6 months and begin accruing after that. Where does it say they go back and pick up 6-months' worth? I guess it's in what you take to be the definition of "deferred."

My guess is the definition, or whatever, is probably among a bunch of print on the receipt I signed way back when at the Guitar Center. I guess I was supposed to read all this crud, also (while I have a line of people standing behind me waiting for service during the Christmas shopping rush). Honestly, even if there wasn't the rush, who'd have read all that crud anyway? I'd have just figured it said you agree to pay within 6 months (like the banners say in big print), and if you don't, they start charging interest.

Anyway, they end their letter with saying they cannot honor my request to reverse the finance charges, even though I paid the principal balance in full. Now, there are lots of late charges they're adding in the meantime because I refuse to pay finance charges. They warn me how this will grow and grow, and I am better off paying. I still refuse, but do not bother to respond. They're entrenched, so what's the point?

Now, get this. Some months later (today), they send me another letter. It reads the same - ONLY THE NUMBERS ARE ALL OFF in terms of the original account balance (principal, payments, etc.). I am wondering how they got it all screwed up.

Well, as it turns out, they sent me some other guy's statements HIGHLIGHTING the same language and TELLING HIM THE SAME THING IN THE SAME WAY!

That was my whole point in my complaint letter to them. This whole manner of LURING FOLKS into this high interest charge situation is deceptive. The scheme to procuring high interest charges is a combination of (1) counting on small-print and "things nobody ever reads;" (2) telling people where they DO READ that there is no minimim payment due; and (3) whacking them with ghastly back interest at the FIRST mention that there is going to be a minimum payment due.

I even stated in my letter to them that I would be willing to bet that they have a great many people complain about getting TRAPPED in this manner.

Their mistake in sending me some other guy's information USING THE SAME FORM LETTER confirms my belief even more strongly. THEY HAVE A FORM LETTER IN PLACE TO REJECT COMPLAINTS OF THIS NATURE - A FORM LETTER! That tells me this happens alot. What happens alot? People getting confused because of the manner in which the whole thing is presented.

Now, I would like to put forth a legal proposition, which I believe to be a correct statement of the law. You legal eagles and legal wanna-bees can even look in the Restatement of Fraud (with the disclaimer that this treatise is written by highly-esteemed legal scholars and not the legislature or courts - though, it is often cited and accepted by courts as containing proper assertions of the law). With the disclaimer aside, you will probably be able to confirm much of the Restatement is generally accepted by many states' Supreme Courts/Courts of Appeals as correct on the law.

The legal proposition is, to paraphrase, "When a person makes a representation of fact that is literally true, but the person knows he is making it in such a manner as to lead to confusion as to its interpretation or understanding, and the person intends to profit from that misunderstanding, the person will be held to have engaged in fraud."

Didn't understand? Well, I found this law based on a case I actually had a while back. In the case, a company was sending unsolicited drafts (basically a check) to royalty owners in envelopes also containg an assignment to the company of their royalty interests. There was a cover letter, stating little more than (to paraphrase) "Read the enclosed assignment, and if you agree, sign and return in the enclosed envelope, and you may deposit the draft in your bank."

By the way, the draft was only a small fraction of the worth of the royalty interest. How would you like to buy a royalty interest that pays $1000/mo. (indefinitely) for $12,000? I know I would.

Needless to say, recipients of these packages believed the contents to be basically confirmations of division orders (i.e. from time to time, producers request owners to re-confirm the percentage of production to which they are entitled as compared to other landowners in the pool). Recipient victims thought the checks were their royalty checks, not assignments GIVING AWAY their royalty interests.

See how that scam worked? The defense, of course, was basically "Nothing we said was false. We did not misrepresent anything."

No, I guess not. They just counted on the fact that a certain percentage of people out there will not understand and give up their royalties for pennies on the dollar.

In the end, the company gave the elderly lady her royalty back.

But that's how I think the HSBC scam works. I'll bet there are a good number of consumers who understand this concept of back-charging interest and a great many who don't. To catch the ones that don't, HSBC will send them statements saying nothing is due, until when they finally send the first notice that something is due. Then, IT'S TOO LATE.

Then, HSBC will point to all the language THAT IT NOW HAS TO HIGHLIGHT TO GET YOUR ATTENTION. That they have to highlight it for you indicates to me that it was not obvious in the first place. It is just that mumbo-jumbo on statements nobody ever reads, such as "Jump start into the new school year with the latest technology from CompUSA. We've got what you need.... Bla... Bla... Bla... Bla...." Nobody ever reads that crap. All people want to know is "What is the balance?", "Is there a minimum payment due?", "When is it due?" Beyond that, most people don't care and don't have time to scour the rest of these statements, which are loaded with sales pitches. We are conditioned to ignore this crud, and HSBC knows it.

They get complaints that their promotion was misleading, and then, they turn the legal disclaimers on the consumer.

I, in fact, pointed this out to them when they accepted my check. Apparently, they did not read where I put on the check that "Indorsement constitutes acceptance as paid in full." Of course, they would likely claim that they can't be expected to see MY disclaimers because they process checks with machines. They don't have time to process checks manually.

To that argument, I say, the average consumer does not have time to read your statements, which he knows are loaded with a bunch of sales crud. Nor, do your statements concerning how to avoid "deferred finance charges" just come out plainly and state, so that we all KNOW WITHOUT A DOUBT, that "We will back charge you for interest in the amount of XXX.XX if you do not pay this account in full by xx/xx/xx." That would be more clear.

Don't you think that, after all the complaints, they have not thought about this as one step toward clarification to minimize the potential for confusion? Of course, they have. That's why they DON'T do it. They THRIVE on the confusion.

Don't you have every reason to believe that's also why in every statement they send during the deferment period, there is NEVER ANY MINIMUM PAYMENT DUE? They could have structured the program the way it would be most commonly understood. That is, they could have made a minimum payment be due AT OR BEFORE THE EXPIRATION OF THE DEFERMENT PERIOD - and not after. Don't you know that was a calculated move on their part in DESIGNING the scheme? They know we look at the statement, and the first thing we look for is "Minimum Due." We see "Minimum Due: $0.00" and chunk the statement in a pile and wait for next month's statement to see if something is due yet.

There are alot of people out there pleading their cases and then bending over and taking it in the back-end because, after all, the big finance company covered all these "legal bases" with disclaimers and crud, so they must be right, and I'm just the sucker who should have seen this. They are counting on all of us suckers out there.

Don't you know they make a *beep* of alot of money this way?

Wed Jan 19, 2005 11:50 pm      

In the fine print it also said you agree to binding arbitration. Thanks for your report here on the web site. You confirmed what many people need to understand.

How insulated does Household - HSBC feel by the binding arbitration clause? Will it hold up in court? One court already said it was legal but "bordered on oppressive and almost illegal."

Yes, the statements are deceptive. Yes, the arbitrator favors Household -HSBC by about 40,000 to 8, according to my last research.

There is a difference between lending, sub-prime lending, and predatory lending. Household - HSBC practices predatory lending, but it can be argued that everything is legal, but barely so, as the court said. "Bordered on oppressive and almost illegal."

So why do they choose to do it this way? That is the key point, and what makes them predatory. It is not a market imperative, but simply because they can get away with it.

Thu Jan 20, 2005 1:25 am      

I think your question is probably more rhetorical, but I think HSBC does it because of 2 reasons:

First, it is easier to steal a little from alot of people and get away with it than to steel alot from any one person. Who cares if you've been screwed out of a few hundred bucks? This goes for courts, too. Judges have heavy dockets as it is. Imagine the apathy you experience when you go in to court. The judge has too many more-pressing cases with "serious" issues.

Second, combine the tort-reformists' mentality with the "it won't happen to me" attitude. What do you get? A bunch of self-centered folks with a "Monday-night quarterbacking" rush to judgment. "I've heard your gripe, but you were dumb not to read the terms. I know I would have."

This type of person is quick to judgment without taking a close look at his own behavior. How often have you dropped off your car at a repair-shop and really, truly, honestly, read the entire back of the work-order with all the disclaimers? If you claim you do, I'll surmise, you're freakish. Most people "don't worry" because they don't think the corporate world is as full of greed as it is. But it is. That's why they get the lawyers to include all the "slippery" language in their favor in the first place. Because they know it could be you against them.

So they just figure if you stick it in writing, it's got to be binding. Next time you drop off your car, I want you to read the back of the work order. There is a fair likelihood that you will find a clause that says the repair shop assumes no liability for theft, damage or vandalism to your auto while it is at the premises. Having read this language, would you really agree to such terms (say e.g. they don't have to reimburse you if they leave the keys in the ignition overmight and the car is stolen)? I'll bet you wouldn't want to agree to it. Then, what? Do you really even attempt to bargain for a change in these terms? Who does?

Now, suppose you have a whole industry foisting these terms on everybody. How can they possibly be negotiated? You can't take your business elsewhere and get a better deal. For example, it is becoming so common to throw in arbitraton clauses, that soon, everyone will do it. I challenge anyone (in the capacity of an ordinary, every-day consumer) to shop for a lender and successfully bargain for the deletion of a boiler-plate arbitration clause. It will not happen.

Answer? A few of us are cluing into the big picture, but the general "tort-reformist" morale guides most people. Maybe someday, the social tide will change, and people will recognize first and foremost that business practices are getting way out of hand when you expect a consumer to be reasonably warned by an "*" (which is nothing more than a symbol that is supposed to tell you that "Whatever you might be led to believe, watch out, because it is not exactly true. Look elsewhere to see if you can find the bad parts we tucked away in legal jargain and small print."

But that's the way it is, and the people are buying into it. Doing business on a partial disclosure / "*" basis is considered generally acceptable. It amazes me how readily people will side with issues that are opposite of their own interests. But they do. They do it on the myth that:

(1) they are good conservatives;
(2) good conservatives should really have no need to file suits;
(3) liberals file suits;
(4) suits drive up costs for everyone;
(5) we need to stop these lawsuits;
(6) enact laws to take away the rights of everyone, for the abuses of the few.

As a perfect example, take med-mal caps on damages. They were recently enacted in Texas with a $250k cap on "non-economic" damages. This category includes pain and suffering, mental anguish, disfigurement, impairment, etc. Now, suppose Dr. is paged for emergency and rushes away from his favorite cantina where he was getting "plastered" with his buddies. He then botches a spinal surgery and leaves your best friend (age 30, housewife with kids, 3 and 5 yrs old) quadriplegic. Do you think the value of your friend's enjoyment of life is really only limited to $250k? If you do, you're brutally cold. If you agree your friend's enjoyment of life is worth much more, do you think it is fair for her to sacrifice that value in the name of some theoretical "greater good?" If so, why? Is it so that (1) DR.'s insurance company doesn't have to compensate her for the real value, (2) so Dr.'s premiums will remain lower, (3) so Dr. can afford to keep his big house, cars, IRA, country-club memberships, etc.? It's either that or Dr. threatens to leave the practice because "There's a health care crisis." Health care crisis my....! Have you seen the astronomical growth of the medical industry? I cannot go through a town and not see how they're expanding wings onto hospitals, left and right. I can't watch T.V., without expensive and incessant commercials telling me to ask my doctor about... bla... bla... bla...

I know this is all off-topic, but my point is we as consumers, and individuals (not entities) with hearts, minds, souls and limited life-spans; have all bought into this pitch from lifeless entities where the only thing that guides them is the almighty $$$. No conscience, just $$$. If you can do it and not run afoul of the law, do it! If there's a chance you might get caught, what are the odds? Factor those odds into the cost-of-doing-business.... AND THEN TELL ALL THE CONSUMERS HOW THE COST-OF-DOING-BUSINESS IS TOO HIGH and could be much lower without all these disgruntled people filing frivolous lawsuits.

There's your answer!

But if you get a good-thinking jury, they usually come around after seeing what's really going on. That's why business lobbies are funneling money to legislators and courts to enact laws and render decisions that take away the rights of juries of ordinary citizens to decide cases. They're afraid that what they do might be judged by us ordinary folk.

But they'll tell you arbitration is more-streamlined, cheaper, etc. Hah! Check it out yourself. Find out what the filing fee is for a lawsuit at your local courthouse. This is basically what you pay the judge to get your case in front of a jury. You'll find about $200-300. Now, find how much it costs to go to arbitration. It's very common to see $5,000; $10,000; $15,000. Now, R U gonna pay that kinda dough to avenge your rights if you've been screwed out of $1500? Nope! Just got rid of that claim! Good thing our lawyers stuck that arbitration clause in there!

I bet you wish you didn't ask!

.... And no, I'm not a flaming liberal. Actually, more conservative than not. I just tend to think on these issues quite a bit more since my job involves trying cases and what's happening to regular people out there. For ex. I represent clients who had a new roof put on their home, and it turns out there was a manufacturing defect in their shingles. They did not self-seal. Know what that means? Their roof soaked in rainwater like a sponge. House is ruined. Water in attic, walls, insulation, carpet, beneath wood floors, etc. - with all the mold/mildew/stench to go with it. Mfg. admits defect, but won't pay for damage because they have a "printed" warranty policy (which noone is expected to see) that says they are not responsible for consequential damages if their shingles fail. We'll see about that!!!!

But that's what I mean about how consumers need to take greater skepticism with these practices, rather than bending over and assuming the corporations always win simply because they've got some writing somewhere.

If you really knew that you'd have to cough up $5,000 to an arbitrator to hear your $1,000 complaint, would you really be on that "tort-reform" "pro-arbitration" bandwagon? You shouldn't be because odds are, you're the only one who stands to get burned by it. So why vote against your own interest? See my point?