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.
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.
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 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 email@example.com
To contact the editor responsible for this story: Mike Ferullo in Washington at firstname.lastname@example.org
The settlement order can be read at http://src.bna.com/d5w.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)