HSBC hit with two class-action lawsuits

By Becky Yerak
Posted July 7, 2010 at 5:02 p.m.

Two HSBC units were hit with two federal class-action lawsuits last week claiming they’ve sold confusing credit-card “payment protection” plans to senior citizens, the unemployed and disabled residents in New Jersey and Pennsylvania who might not be eligible for the coverage plans.

The lawsuits against HSBC Bank USA and HSBC Card Services Inc., which is based in Illinois, were filed July 2 in U.S. district courts in Pennsylvania and New Jersey, and seek class-action status. The suits claim that HSBC, whose U.S. consumer finance unit is headquartered in Mettawa, marketed such “payment protection” products called “Personal Account Protection,” “Personal Account Protection Elite” and “Account Secure Plus” to credit-card customers.

HSBC declined to comment.

“Although HSBC’s Payment Protection is indistinguishable from a contract of credit insurance, Payment Protection is not marketed or sold as insurance,” the suits said. “HSBC does not register Payment Protection with” Pennsylvania or New Jersey insurance regulators, “thereby avoiding state regulation.”

Not only that, the lawsuits say, but HSBC sells the product in a “deceptive and misleading manner” through direct mail and telemarketing.

It represents Payment Protection as a service that suspends the required minimum monthly payment on a credit card and excuses the monthly interest for a limited period of time, preventing the account from becoming delinquent, the suits said. The marketing says, “In good times and bad, we’ve got you covered.”

But the Payment Protection plan is a “dense maze of limitations, exclusions and restrictions, making it impossible for customers to determine what Payment Protection covers and whether it’s a sound financial choice,” the suits say.

The lawsuits further allege that HSBC makes no effort to determine whether a subscriber is even eligible at the time of sale.

“As a consequence, the company bills thousands of retired persons, many of whom are senior citizens, along with the unemployed, self-employed, part-time or seasonal … residents, as well as disabled individuals, for payment protection coverage, even though their employment or health status prevents them from receiving benefits under the plan,” the suits said.

For example, “part-time or seasonal workers are limited or categorically excluded from receiving benefits,” the suits say. “To qualify for benefits, one needs to work at least 30 hours a week in employment to be considered permanent, however HSBC makes no effort to investigate” whether the consumers are part-time or seasonal.

HSBC knows that few of those subscribers will ever receive benefits and for those who do the premiums will exceed benefits, the suits said, noting that HSBC has increased profits by “many millions of dollars” through the Payment Protection sales.

The cost of Payment Protection is a monthly charge of $1.35 per $100 of a credit-card balance. For example, a credit-card customer with a $10,000 balance who has subscribed for Payment Protection owes HSBC $135 that month just for coverage.

The lead plaintiffs are Marilyn Rizera, a 54-year-old disabled resident of Magnolia, N.J., and Philadelphia residents Edward Esslinger, 63, who is also disabled; Gloria Glover, 68, who is retired and therefore allegedly excluded from receiving most or all of the benefits; and Ardath Rogers, 75, a part-time worker.

“Benefits are unavailable or limited for disabled persons,” the lawsuits say, adding that HSBC fails to ask if consumers are disabled. In some cases, “Payment Protection has been unilaterally imposed upon consumers,” the lawsuits say.

Telephone marketing scripts are “incomplete, indecipherable, misleading and obfuscatory,” the suits say. The lawsuits’ allegations include breach of contract and breach of the covenant of good faith and fair dealing, and unjust enrichment. Both lawsuits were filed by Golomb & Honik of Philadelphia, and the plaintiffs are seeking refunds of Payment Protection payments made to HSBC.

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  1. James July 7, 2010 at 7:07 pm

    HSBC has is not the only CC company that has underhanded practices. Go after them all !!! Get the credit reporting agancies too – they are holding hands in bed.

  2. Mark July 8, 2010 at 9:14 a.m.

    Did two stints with this company and they never cease to amaze me with
    their creativity when it comes to fleecing the public. They also invented
    predatory lending.

  3. dora July 8, 2010 at 9:52 a.m.

    They are not obligated to purchase this product, it’s an optional product and can be cancelled at any time. It’s not the banks fault if the consumer doesn’t understand or doesn’t read the fine print. We are too quick to file lawsuits when the consumer could have said no or cancelled.

  4. Mark Belcher July 8, 2010 at 10:01 a.m.

    They got me to 5years go,hsbc,bank of america,captiol one,target,best buy.
    they sale you insurance on your cards,but when activate a claim,they don’t
    pay and screw up your credit till you can get job.Know look at people
    lives they screw up as well the economy.

  5. Scahumburg Pete July 8, 2010 at 12:30 pm

    Bloodsuckers. A Despicable business.

  6. Ron July 8, 2010 at 12:53 pm

    HSBC handles the card for Menards. Two years ago I used the card. Got the bill in the mail that said it was due on the 12th. Logged in to the website on the 10th. The website had a due date of the 10th and that it wouldn’t post until the 13th, but I could pay an extra 10 dollars to avoid a late fee of 20 dollars and have it immediately posted. If I had mailed it on the 10th I probably would have been hit with a 20 dollar late fee anyway. So I paid the extra 10 dollars for immediate posting. I think under the new rules that can’t have different dates anymore. But I would sure be happy to be in a class action suit to get that 10 back. I usually spend 800 at home improvement stores annually, but none of it will ever be at Menards again.

  7. Sue July 8, 2010 at 2:38 pm

    No one is obligated to buy the product. We are all responsible to read or understand what we buy. It is not different from buying a TV or electronics that if it is complicated enough, you just return it and get your money back. You have 30 days to review the plan and I found out right away after reading it that it was not for me.