The Scotsman reports that HSBC has denied that potential litigation problems will stop its $14bn takeover of consumer lending bank House International. Other problems, however, may make the acquisition more difficult to put to bed.
A consumer lobby group, the Association of Community Organisations for Reform Now (ACORN) has commenced three actions totalling $8bn against Household in respect of predatory lending claims - charging those with a poor credit history excess interest and fees as they have nowhere else to go. Acorn has said that it will vigorously pursue HSBC in the event that the bank is successful in taking over Household.
HSBC isn't worried about ACORN, but may be more concerned about a New York civil rights group which is doing its best to stop the takeover. Inner City Press (ICP) is to apply to block the transaction on the basis that it would breach the US Community Reinvestment Act, which makes it mandatory for banks to treat customers in ghettos and low-income areas the same way as they treat all other client groups.
ICP claims to have evidence that HSBC has 'shunned' black and Latino borrowers in New York. It alleges that whites are 2.7 times more likely to get mortgage refinance loans from HSBC as African Americans. ICP also claims that Household, being a so-called predatory lender, has taken advantage of low-income ethnic groups. In its opinion, therefore, the combination of these two institutions would do nothing to service the interests of those it claims to represent.
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