||The examples and perspective in this article deal primarily with USA and do not represent a worldwide view of the subject. (November 2011)|
|Industry||Finance and Insurance|
|Headquarters||Mettawa, Illinois, United States|
|Key people||Niall Booker (Chairman)
Parick Burke (CEO)
|Employees||58,000 (including HSBC Bank USA, HSBC Bank Canada and CIBM)|
HSBC Finance Corporation is a financial services company and a member of the British HSBC Group. It is the sixth-largest issuer of MasterCard and Visa credit cards in the United States. HSBC Finance Corporation was formed from the legal entity that had been known as Household International, and is now expanding its consumer finance model via the HSBC Group to Brazil, India, Argentina and elsewhere.
HSBC Finance Corporation’s subsidiaries primarily provide real estate secured loans, auto finance loans, MasterCard and Visa credit card loans, private label credit cards, personal non-credit card loans and specialty insurance products to middle-market consumers.
Household Finance Corp. was founded in 1878 by Frank J. Mackey of Minneapolis, Minnesota. It claims that in 1895 it was the first financial company to offer the installment plan, under which a consumer loan could be repaid through a regular monthly amount rather than a lump sum on the due date. It was restructured in 1981 under a holding company named Household International Inc., and, in 1998, it acquired Beneficial Corporation.
Household International was a provider of consumer loans and credit cards in the United States, Canada and the United Kingdom. In October 2002, Household International settled for US$486 million charges of predatory lending by attorneys general in 46 U.S. states.
On November 14, 2002, HSBC announced the acquisition of Household International Inc for a total value of US$15,294.06 million.
2003 to 2010
On March 28, 2003, HSBC acquired Household International, which was merged in 2005 with a subsidiary company that became the HSBC Finance Corp. Household International CEO William Aldinger became the highest-paid director in the United Kingdom before announcing his departure in February 2005. On March 2, 2009, HSBC chairman Stephen Green said that, in retrospect, HSBC should not have acquired Household International.
In August 2005, HSBC-N.A. announced plans to acquire Metris Companies, Inc, a credit card issuer to the U.S. middle market segment. The deal closed in early December 2005 and is an all-cash transaction worth close to US$2 billion. HSBC will insert the Metris product line including the American DreamCard (under the Direct Merchants Bank brand) into the HSBC-NA credit card family of products.
In 2009, HSBC Finance Corporation announced the discontinuation of loan originations of all products by its Consumer Lending business, but continue to service and collect the existing receivable portfolio as it runs off, while continuing efforts to reach out and assist mortgage customers with their loan repayments and home preservation. The Consumer Lending branch offices, branded in the US as HFC and Beneficial, had ceased taking new loan applications as soon as practical and substantially all branch offices will be closed as soon as commitments to customers are satisfied.
2010 to present
On August 10, 2011, Capital One Financial Corp announced that it will buy the U.S. credit card arm of Britain’s HSBC for a premium of about US$2.6 billion as a way to expand its domestic credit card business. The acquisition includes the HSBC unit’s approximately US$30 billion credit card portfolio.
The sale of the U.S. credit card division came a little more than a week after HSBC announced that it will sell almost half its retail branches in the United States. That included the sale of 195 branches in New York and Connecticut to First Niagara Financial Group. HSBC said the two actions are part of its plan to make HSBC a more internationally focused business, but reassured that the U.S. is still considered a key market in its strategy.
HSBC and Capital One said that they expect no immediate changes to the credit card programs and operations. HSBC customers will see no near-term service changes and should be able to use their credit cards like normal.
HSBC Finance Corporation has a Canadian operation which it inherited from Household International. Since the HSBC acquisition the Canadian subsidiary works increasingly closely with HSBC Bank Canada. The unit offers mortgages, personal loans and insurance through 75 branches in 10 provinces and via merchant relationship with stores such as The Brick, Henry's, and Arctic Cat. HSBC Finance Canada ceased operations on March 21, 2012. 75 branches were closed immediately and approximately 500 staff members laid off. HSBC Finance will continue to service existing lending products through its contact center network. An announcement on HSBC Finance Retail Services and what will happen to those accounts, is still to come.
In the United Kingdom, HFC Bank is a sub-prime consumer lender. Its branch network originally consisted of around 125 Beneficial Finance branches. Since Household International's acquisition by HSBC, HFC Bank has worked increasingly closely with HSBC Bank plc particularly for cross-selling purposes.
HFC also provides retail finance for stores such as John Lewis, Currys and PC World. The Marbles and Beneficial branded credit card portfolios were sold to SAV Credit in October 2007. In January 2008, the Financial Services Authority fined HFC £1,085,000 for failing to take reasonable care in its sale of Payment Protection Insurance. Beneficial Finance is renowned for its predatory sales tactics.
In June 2009 HSBC announced that 100 branches would be closed including all six in Scotland. The remaining branches would be closed to new business and eventually close altogether. The company website as of February 2010 states that all branches are closed.
Beneficial and HFC
Operating under the HFC and Beneficial names, HSBC Finance Corporation is the second largest consumer finance company in the United States, with more than 900 branches in 46 states. It provides a variety of real estate secured and unsecured loans to primarily sub-prime customers, as well as increasing numbers of other product lines such as auto loans and service plan policies. On 2 March 2009, it was announced that HSBC would no longer accept new business from HFC/Beneficial, and would eliminate 6,100 jobs.
Children of former full-time Beneficial employees are considered for scholarships to four Maryland institutions of higher learning: Hood College, Johns Hopkins University, St. John's College and Washington College.
Decision One mortgage company directly originated real estate secured loans sourced through mortgage brokers. This subsidiary was shut down September 2007 due to the sub-prime mortgage meltdown. Approximately 1,500 employees were affected.
HSBC Bank Nevada NA
HSBC Bank Nevada issues a range of HSBC-branded credit cards, to both credit card only customers and customers of HSBC Bank USA.
Private label cards
HSBC was the third-largest issuer of private label credit cards in the United States, including cards for more than 70 active merchant relationships, including Best Buy, GM, Yamaha, Kawasaki, Neiman Marcus, Polaris and Saks Fifth Avenue. Most of its card portfolio was sold to Capital One in 2011.
The techniques and experience of HSBC Finance Corporation are being increasingly exported to other HSBC markets, for example, the establishment of Proa by HSBC Bank Argentina, and new business being established in Poland by HSBC Bank Polska.
- "HFC: Our History".
- "Household International, Inc. -- Company History".
- "HSBC ends US subprime lending". Boston Globe. March 3, 2009. "It's an acquisition we wish we hadn't done with the benefit of hindsight, and there are lessons to be learned."
- HSBC SELLS NON-CORE UK CARD PORTFOLIOS http://www.hsbc.com/1/PA_1_1_S5/content/assets/investor_relations/sea/2007/sea_071030_uk_non_core_card.pdf
- FSA fines HFC Bank £1.085 million for PPI failings http://www.fsa.gov.uk/pages/Library/Communication/PR/2008/004.shtml
- Beneficial Finance to shut offices in Scotland Jeff Salway. The Scotsman. 5 June 2009
- HSBC to close 100 'sub-prime branches' James Charles. Times Online. 3 June 2009
- Beneficial Finance Beneficial Finance
- "Scholarships for Children of Former Beneficial Employees." Hodson Trust. 2009. Retrieved 12 December 2009.
- HSBC Global website
- HSBC USA website
- Beneficial USA website
- HFC USA website
- Household – HSBC Watch consumer advocates