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BANKING giant HSBC has been accused of discriminating against black and Hispanic borrowers by an energetic New York civil rights group that is trying to block its £9bn takeover of Household International.
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The Bronx-based Inner City Press, which in the past has landed blows on blue-chip banks such as Citigroup, Bank of New York and Lehman Brothers, is now targeting HSBC in an aggressive campaign likely to embarrass the bank at the very least.
ICP is applying to block the Household deal - HSBC's biggest acquisition to date - on the the grounds that it would breach the Community Reinvestment Act, which requires banks to serve fairly customers in the ghettos and low-income neighbourhoods. It has lodged filings opposing the purchase with the US Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Reserve Board.
'To combine these two companies, as proposed, would create a conglomerate blatantly violating the US fair lending laws,' the group's executive director Matthew Lee said.
The ICP has unearthed data available under the Home Mortgage Disclosure Act which it said showed how HSBC had shunned black and Latino borrowers in New York. In 2001 HSBC denied African Americans' mortgage refinance loan applications 2.7 times more frequently than whites, a denial rate significantly worse than the industry-wide 1.66 times, ICP said. The figures for Latinos were respectively 2.3 times and 1.57 times. HSBC allotted just 17.4% of all refinance loans to non-white customers, compared with the industry average of 29.2%.
The group has also accused HSBC, chaired by Sir John Bond, of doing less than full due diligence on Household. The US firm's reputation was blasted after it paid $484m last month to settle widespread allegations of loan mis-selling.
'In essence, HSBC with its normal interest rate loans under-serves people of colour, while Household targets these same (people) with high-cost loans,' ICP's Lee said. 'Household is a predatory lender. Not only would HSBC be acquiring a predatory lender...it would become, and export, a predatory lender.'
HSBC plans to use Household's lending model in other markets including Mexico and Japan.
ICP has also alerted the US authorities to past allegations against the bank, including accusations of money laundering, poor environmental standards and gender bias. ICP, a non-profit civil rights group, previously has forced Bank of New York to start serving customers in the Bronx and Harlem as a condition of getting approval for a takeover. It also won concessions from Lehman Brothers and challenged Citicorp in its purchase of Associates First Capital, which serves the same markets as Household.
It has clashed before with HSBC, accusing it of closing branches in low and moderate income neighbourhoods after its acquisition of Republic Bank of New York. HSBC, which last week described the all-paper deal as 'an extremely good match', had no comment.
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