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HSBC coughs up US$1.58bn to settle Household legacy

HSBC Finance will take a pre-tax charge of US$585mln in the second quarter of this year.
PIcture of HSBC office
Household has been a running sore for HSBC

HSBC (LON:HSBA) has agreed to pay out US$1.58bn to settle a dispute related to its disastrous 2003 acquisition of subprime lender Household International.

A settlement with the group of US plaintiffs in a class action was agreed ahead of a second trial due to start yesterday.

HSBC had disclosed a possible exposure of up to US$3.6bn for the case, which related to events prior to Household's acquisition by the UK bank.

A trial in 2009 had awarded US$2.5bn to the plaintiffs but though a court of appeal upheld that judgement it wanted a new trial to look at loss causation and damages.

As a result of the settlement, the bank said its HSBC Finance arm would take a pre-tax charge of US$585mln in the second quarter of this year.

HSBC bought Household for US$14bn in what was one of its worst deals ever with billions being lost in impairments, bad debts and fines.

The case stemmed from a settlemtn by Household in a case that accused it of predatory lending and deceiving customers into paying exorbitant rate of interest.

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