Household HSBC Watch

Consumer Watchdog Organization HSBC Watch, formally Household Watch, informed news services in the United Kingdom of another article about HSBC’s troubled lender Household International.

The article entitled “Mortgage borrowers file RICO lawsuit” first appeared in the Nashville Tennessean on October 25, 2004. It is found here:
http://www.tennessean.com/local/archives/04/09/60293750.shtml?Element_ID=60293750

It is not the first time Household International has been sued under United States RICO charges, but it may be the first time HSBC must take such actions seriously. More RICO charges might be forthcoming as the American consumer realizes the intentional harm done by Household - HSBC’s credit card processing subsidiary, Retail Services, as evidenced by Shea vs Household.

Sec. 1962(c) of RICO, the section most frequently used to bring civil RICO actions, makes it a crime to conduct or to participate in the conduct of the affairs of an enterprise through a pattern of racketeering activity. The RICO statute lists certain state and Federal crimes as the type of racketeering activity that may form the required pattern for a RICO violation. Because the racketeering activity can include such broad offenses as mail fraud, wire fraud, certain securities laws’ violations, and interstate transportation of stolen property and funds, a large variety of purported acts of fraud can be brought within the RICO statute. Other sections of the RICO statute make it a crime to invest the proceeds of a pattern of racketeering activity in an enterprise, or to acquire an interest in an enterprise through a pattern of racketeering activity, or to conspire to violate any of RICO’s provisions.

The reference for this is case law wherein the issue of Fraud became a focal point. Household Watch believes that similar circumstances exist in the relationship between merchants and Household Retail Services, dealers and Household Retail Services, and certain consumers who had a contract which was ultimately sold to Household.

Failure to disclose, in Household Watch’s opinion, is an act of omission which reflects poorly on HSBC, Household, dealers and merchants. The action discussed here dates back to the period covered by Shea v Household. This suggests to Household Watch that William F. Aldinger possibly built Household Retail Services in this manner:

Failing to disclose all the terms of the contract
Attempting to sidestep Regulation Z
Billing customers and crediting their payments late
Failing to bill customers in an attempt to make their payments late
Collecting all interest due by intentionally invalidating “no interest” promotions
Designing a system whereby payments could not be made locally
Failing to list toll free customer service telephone numbers in toll free directories Failing to implement an online payment system until it became imperative
Failing to train customer service reps on Regulation Z
Improper processing of change of address notifications
Improper credit reporting

At the same time Aldinger was building Household Finance, and acquired Beneficial Finance. The same actions apply there, and we all know the results. Household’s claims to have invented the Refund Anticipation Loan (RAL) in the 1980’s and it too became predatory in nature. H&R Block was sued and lost. Block stated that Household should accept some of the blame.

Now there is a Racketeering Influence and Corruption (RICO) suit against Household and H&R Block. It is clear from case law, Household’s agreement to settle with no admission of guilt in some instances, and the data collected by Household Watch, that the company is still predatory in nature.

Household Watch stands by our initial assessment that Household will get their merchants sued. Whether such action comes as RICO cases or class action remains to be seen. Household Watch believes it is time to stop accepting class action deals with no admission of guilt on the part of Household International, wherein the consumer gets the worst deal of all. Shea vs Household was settled for $11 million (USD).

HSBC Watch is pushing for a nationwide initiative to connect Household, ITLA Capital, Best Buy, over 60 other merchants, and Household’s dealers to RICO charges that would finally result in payments to the consumer that are substantial, and that would make Household such a liability to HSBC that Household disappears from the American landscape forever.

One of the benefits of staffing the HSBC Watch website with volunteers 18 hours a day and 7 days a week is we pick up data that quickly disappears or was released when it should have been kept quiet. Such is the case when Saks let “ongoing compensation” slip in their press release. And Household Watch has the press release.

It also said: “Saks Incorporated Chairman and Chief Executive Officer, R. Brad Martin, commented, “We are pleased to enter into this important strategic alliance with Household. This is a unique opportunity to join forces with one of the most highly regarded, well-established consumer finance companies in the world, while leveraging our core competency of customer service.”

The question remains - does ongoing compensation translate to the merchant making a kick back on improper late fees, late processing of payments, and other possibly deliberate violations of Regulation Z? If so RICO may take effect for both Saks and Household International - HSBC, and the Feds will be looking long and hard at Best Buy Stores Incorporated as well.

Cleary Gottlieb represented Saks in the sale of its private label credit card business to Household International (a subsidiary of Cleary client HSBC Holdings) and in the parties’ entry into a strategic alliance relating to that business. The transaction closed today. Saks sold the private label credit card accounts owned by its credit card bank and the outstanding receivables on those accounts for approximately $300 million in cash and the discharge or assumption by Household of approximately $1 billion of securitization liabilities.

Household will issue private label credit cards to Saks customers and own new accounts and balances generated during the term of their alliance (initially 10 years). Saks will receive ongoing compensation from Household and will continue to provide key customer service functions. Cleary represented Saks in discussions with the Office of the Comptroller of the Currency, which, under the Bank Merger Act, had to approve the sale and alliance. The OCC approved the transactions after Saks and its wholly owned credit card bank entered on March 31 into consent orders with the OCC regarding the Bank Secrecy Act and anti-money laundering issues.

Saks owns and operates more than 350 department stores including Saks Fifth Avenue, Saks Off 5th, Parisian, Proffitt’s, McRae’s, Younkers, Herberger’s, Carson Pirie Scott, Bergner’s and Boston Store. Household is one of the nation’s largest issuers of private label and general-purpose credit cards. The reference for this portion of this article is: http://www.cgsh.com/english/news/NewsDetail.aspx?id=298

Household - HSBC Watch can be found at www.householdwatch.com