The ghost of Household International is dead

As mortgage blues continue, one more lender is gone from the American landscape. That lender is HSBC Finance, formerly known as predatory lender Household International.

Household was sold to HSBC in 2003, following Household’s $484 million predatory lending settlement. After HSBC purchased the company the name was changed to HSBC Finance Corp., but little if anything really changed. HSBC continued to finance subordinated loans such as home equity loans. HSBC also operated Decision One Mortgage.

On September 21, 2007, HSBC will took an $880 million writedown and closed the business.

Trying to make a profit from subprime lasted until March of 2009, at which time HSBC exited all but credit card operations. HSBC shut down HSBC Auto lending as well.

While HSBC served a niche market that may remain under-served for many years, it was Household International under the guidance of CEO William F. Aldinger that transitioned from a well respected company to a predatory lender.

In April 1998, Household agreed to buy Beneficial Corp. for about $8.25 billion in stock, a deal that would create one of the nation’s largest consumer finance and credit card companies. Aldinger had been in charge of Household International for four years at that time, joining the company in 1994.

Household International was sued by the State of California the same year that Household International bought Beneficial. California’s Department of Corporations sued Household International in 1998 to stop Household from charging excessive administrative fees after the company admitted to 36,000 instances in which it had violated state lending laws and regulations. Household agreed, but what actually happened shocked to everyone.

In 2001 the state of California sued Household International again after discovering that “Not only did Household fail to comply in 1998, but it began practicing even more abusive lending procedures and passed these practices on to its sister corporation, Beneficial, Inc. As a result, many African-Americans, Latinos and economically disadvantaged Californians found themselves illegally nickeled and dimed by a $26 billion company.”

Household International continued to ignore legal actions, denying allegations, and settling allegations when there was no other option. With the possible exception of Household’s $484 million predatory lending lawsuit, profits from illegal actions far exceeded the fines.

HSBC continued to operate HSBC Finance with few changes. Previous settlements mandated some changes, but history already proved that HSBC would ignore what they could.

It was rumored that HFC and Beneficial Finance, operated by HSBC with much of the old Household International staff, would eventually be licensed to sell prime mortgages. It was not to be.

Whether a partial disregard for the law caught up with HSBC Finance, or whether regulators simply did not trust the company remains to be seen. One fact is clear. HSBC Finance killed the specter of Household International for good.