CHICAGO (CN) – A federal class action claims HSBC Card Services “slams” its credit-card holders by enrolling them in a “virtually worthless” payment protection plan without notice, and solicits retirees and disabled people to pay for the plan knowing they do not qualify for its benefits. The class claims that HSBC, one of the nation’s biggest credit card companies, has “increased its profits by many millions of dollars, all thanks to a product which provides no benefits to thousands of Illinois residents.”
HSBC pitches its product to retirees, disabled people and people who work part-time, knowing they do not qualify for its benefits, according to the complaint.
HSBC pitches its payment protection plan as “a service that suspends or cancels the required minimum monthly payment due on the subscriber’s credit card account and excuses the subscriber from paying the monthly interest charge,” for a limited amount of time, the class says.
This service “is indistinguishable from a contract of credit insurance,” but HSBC does not call it insurance to duck state insurance regulations, the class claims.
The class claims HSBC enrolls consumers in the payment protection plan without their knowledge, does not disclose the terms until after a customer is enrolled, and pitches it to people who do not qualify for benefits.
“HSBC does not make any effort to determine whether a subscriber is eligible for Payment Protection benefits at the time of sale,” the class claims. “As a consequence, HSBC bills thousands of retired persons (many of whom are senior citizens), along with the unemployed, self-employed, part-time or seasonal Illinois 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.” (Parentheses in complaint.)
“Despite its simple explanation for marketing purposes, HSBC’s 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 is a sound financial choice,” the class claims.
The class says that HSBC’s payment protection plan costs $1.35 per month per $100 balance, so a customer with a $10,000 balance would owe $135 a month for a plan from which he or she may never benefit.
“HSBC knows that for those subscribers who choose to pay for Payment Protection, few will ever receive benefits under the plan and even for those that do, the amounts paid in ‘premiums’ will usually exceed any benefits paid out,” the complaint states.
The class claims that “HSBC has established its customer service system in such a way that it is difficult for subscribers to cancel Payment Protection, to get detailed information about claim benefits or restrictions, or to file claims.”
For example, “employees at HSBC’s call center are given authority to deny claims immediately over the phone, but do not have authority to approve claimants to receive benefits in the same manner,” the class claims.
HSBC also blows off cancellation requests, the class says.
“As a result of its misleading and deceptive marketing and slamming practices in connection with sales of Payment Protection, HSBC has increased its profits by many millions of dollars, all thanks to a product which provides no benefits to thousands of Illinois residents who are nevertheless charged for the product each month.”
Named plaintiff Dwight Samuels says that from January to June 2010 he was charged $78.24 for a protection plan on his Household Bank Mastercard.
He says he paid for the credit protection while he was unemployed, and “made a claim for benefits but the claim was denied as untimely.”
Samuels says he contacted HSBC to cancel the plan several times, but the company continued to charge him through October. After he complained, HSBC refunded him only $22.78 of the $52.57 he paid during that time, he says.
It is the second federal class action filed against BSBC in a week. Customers sued it in Trenton, N.J., claiming HSBC makes settlement agreements with debtors’ attorneys, then “accepts all but the remaining few payments” from the debtor and “unilaterally and without cause refuses to accept the remaining payment and instead deems the settlement null and void.”
The class in Chicago seeks an injunction and damages from HSBC Card Services and HSBC Bank for consumer fraud and unjust enrichment.
Its lead counsel is Marvin Miller.