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Monday, June 17, 2024 | Back issues
Courthouse News Service Courthouse News Service

HSBC Settles Deceptive Debt Plan Suit for $23M

(CN) - A class of 16 million HSBC credit cardholders can split more than $23.5 million to settle claims the bank charged fees for unsolicited debt-cancelation and-suspension plans, a federal judge ruled.

"Absent the settlement, this case could result in significant expenditures on both sides in responding to [HSBC's] motion to dismiss, completing discovery, litigating any summary judgment motions, and preparing for potentially enormous trial with various expert and class member witnesses," U.S. District Judge Berle Schilller wrote. "Accordingly, this factor favors settlement."

HSBC marketed the plans as services that suspended or canceled required minimum monthly payments on credit cards if the cardholder would be, under specific circumstances, unable to pay.

The plans also excused cardholders from paying monthly interest charges and fees for a period of time, but the cardholders would have to pay $1.35 for every $100 of their month-ending card balances. On average, cardholders paid less than $200 total for the plans, the court dound.

In its July 2010 complaint against HSBC Bank Nevada NA and HSBC Card Services, the class claimed that HSBC enrolled clients in the plans without consent, and that it marketed and administered the plans deceptively.

A second amended complaint brought allegations against HSBC Finance Corp.

HSBC moved to dismiss in November 2010, but the court suspended the case and urged the parties to settle.

After filing a notice of settlement in July 2011, the court granted conditional approval in February and conducted a final approval hearing this past October.

The agreement settles a total of six class actions filed against HSBC in 2010 and 2011 relating to the plans. It includes all cardholders enrolled in the plans after July 2, 2004.

HSBC will dish out $23.5 million to pay settlement costs and claims. Any class member who did not already receive benefits or a refund, and was enrolled for a year or less, may claim a $30 settlement award. Class members whose claims for benefits were improperly denied under a plan may claim a $60 settlement, and all others who did not yet receive a refund and were dissatisfied with the plan may claim $15. No class member can receive more than $150.

Remaining funds will be distributed as a cy pres award to charities, according to the ruling.

"This court believes that the settlement represents a fair compromise between two parties seeking to end litigation whose outcome is murky and uncertain," Schiller wrote. "The settlement, as a product of lengthy negotiation and mediation experienced attorneys who vigorously represented their clients' interest, will therefore be approved."

The final settlement also affords more than $7 million in attorneys' fees, and more than $100,000 in costs. Class representatives will take $3,500 each.

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