OCC Fines HSBC Bank $35 Million Over Credit Card Add-Ons

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By Jeff Bater

April 13 — HSBC will pay a $35 million fine and offer restitution for allegedly charging customers for credit monitoring services they didn't receive under a settlement with a federal regulator.

The Office of the Comptroller of the Currency found the bank’s billing practices violated Section 5 of the Federal Trade Commission (FTC) Act prohibiting unfair and deceptive acts or practices.

The penalty will be paid to the U.S. Treasury. The bank must also identify and compensate customers who enrolled in and paid for the credit-monitoring product between January 2004 and May 2012 but did not receive its full benefit.

Past Actions on Add-Ons

Credit card add-on products have been the subject of a regulatory actions against banks in the past. For instance, in 2013, American Express agreed to pay $16.2 million in fines to federal regulators and provide at least $59.5 million in consumer refunds to settle charges of unfair billing tactics and deceptive marketing of credit card “add-on” products such as identity theft protection (248 BBD, 12/27/13). The Consumer Financial Protection Bureau (CFPB), the OCC and the Federal Deposit Insurance Corporation announced separate but related consent orders in December that year that targeted marketing and billing practices by American Express and its subsidiaries from 2000 to 2012.

HSBC Statement

In the settlement between the OCC and HSBC, the bank neither admitted nor denied the regulator's findings in the case. HSBC North America Holdings Inc. said in a statement it discontinued sales of credit card add-on products in 2012, and that it also sold its card and retail services business that year. Furthermore, it said the settlement was related to legacy products that were sold primarily to customers of HSBC Bank Nevada — as well as to customers of HSBC Bank USA.

The two banks and a vendor sold a credit protection product called CreditKeeper to customers. The product included credit monitoring services.

“Between January 2004 and May 2012, the banks, through their vendors, billed CreditKeeper customers for the full fee of the product, even though not all customers were receiving the credit monitoring services of the product,” the settlement order said. “Between January 2004 and May 2012, the banks retained a portion of the fees paid by the CreditKeeper customers, including fees paid by customers who were not receiving the credit monitoring services.”

HSBC Bank Nevada ceased to exist in 2013; it was a part of HSBC Finance Corporation, which is a subsidiary of the holding company.

Refunds for Customers

“Refunds of product fees and related charges will be made to affected customers, both existing and former, in line with a refund plan currently being developed by HSBC,” HSBC North America said. “The total amount of customer refunds will be determined by the refund plan, and will be funded primarily by HSBC Finance Corporation, with the balance funded by HSBC Bank USA. Costs associated with the civil money penalty and customer refunds are not expected to cause HSBC Finance Corporation to take any additional charges to income beyond those recorded in prior years.”

HSBC Bank USA is based in McLean, Va., and its assets totaled $183.1 billion at the end of 2015.

To contact the reporter on this story: Jeff Bater in Washington at jbater@bna.com

To contact the editor responsible for this story: Mike Ferullo in Washington at mferullo@bna.com

For More Information

The settlement order can be read at http://src.bna.com/d5w.