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HSBC Consumer Finance Business - Will HSBC Hold or Is It For Sale
As a matter of public record we refer to testimony given to the Senate Committee on Banking, Housing, and Urban Affairs by Brendan McDonagh on March 22, 2007
McDonagh's testimony was solicited after the subprime market deteriorated to the point where HSBC is losing money every day. Those close to the matter say HSBC executives, including retired executive John Bond, clearly see how the lack of due diligence prior to buying Household International allowed William F. Aldinger to laugh all the way to the bank, so to speak.
Will HSBC sell the poor performing consumer finance division?
First let's look at part of what McDonagh had to say. He was accompanied by Tom Detelich, president of consumer and mortgage lending, HSBC Finance Corporation. McDonagh spoke on behalf of HSBC - North America:
"Specific to our consumer finance businesses -- these businesses operate under
HSBC Finance Corporation, and serve consumers – with non-prime to prime
credit characteristics -- with products including real estate secured loans, auto
finance loans, MasterCard® and Visa® credit cards, and personal non-credit
card loans. HSBC Finance Corporation is an SEC reporting entity."
"In the area of real estate lending, HSBC Finance is a large player in the subprime
mortgage market. HSBC Finance Corporation’s consumer and mortgage
lending business originates and services loans originated through retail (branch
and direct) and wholesale (broker) channels, as well as portfolio acquisitions.
We originate or purchase a variety of real estate secured and unsecured loans to
primarily sub-prime customers. As one of the nation’s largest consumer finance
companies, we have more than 1,350 branches in 46 states and 11 servicing
facilities across the US."
Clearly most Americans see predatory lending, bad Internet reviews, a nationwide predatory lending settlement, high interest rates, late payments that are not late, and many other factors when they hear the HSBC Finance, HFC, and Beneficial Finance names.
More on this subject, and how Household International turned predatory under William F. Aldinger, is in our case study on the subject
Obviously HSBC cannot continue to have the stigma of predatory lending attached to the HSBC name. Consumer advocates at Household - HSBC Watch, based in the United States, receives HSBC complaints from around the world. "From Panama to China, and from India to the U.K. we became a global watchdog organization after HSBC bought Household and renamed the consumer lending operation HSBC Finance Corporation" said the group.
"We anticipate HSBC will jettison their consumer finance business soon" said Household - HSBC Watch. "But whoever buys it must be prepared to buy back bonds and bad contracts unless a deal means HSBC will absorb bad debt. Obviously the new owners will be aggressive, predatory, ugly, and will throw caution to the wind while avoiding regulators and state Attorney's General for as long as possible."
Household - HSBC Watch claims they will monitor whoever buys HSBC's consumer finance operation, like they did when HSBC bought Household International.
Your comments are invited.
The full testimony is here: http://banking.senate.gov/_files/mcdonagh.pdf
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