HSBC Finance
| Company type | Subsidiary |
|---|---|
| Industry | Financial services |
| Predecessor | Household International |
| Founded | 1878 |
| Founder | Frank MacKey |
| Headquarters | Lake County, Illinois , United States |
Area served | United States, Canada, United Kingdom, Brazil, India, Argentina, Poland |
Key people | William Aldinger (former CEO) |
| Products | Loans secured by real estate, automobile financing, MasterCard and Visa credit cards, private label credit cards, unsecured personal loans, niche insurance products |
| Parent | HSBC Holdings |
HSBC Finance Corporation operates as a financial services entity and functions as a subsidiary under the umbrella of HSBC Holdings. It holds the position of the sixth-largest issuer of MasterCard and Visa credit cards within the United States. The company originated from Household International, which resolved predatory lending allegations by paying US$486 million, in addition to incurring legal costs amounting to $389 million. HSBC Finance is actively broadening its consumer finance footprint worldwide through the HSBC Group, concentrating on markets such as Brazil, India, and Argentina.
The subsidiaries specialize in loans secured by real estate, automobile financing, MasterCard and Visa credit cards, private label credit cards, unsecured personal loans, and niche insurance products tailored for middle-market consumers.
Origins
Household Finance Corp. was established in 1878 by Frank MacKey in Minneapolis, Minnesota. By 1895, it had introduced an installment payment system that enabled customers to repay loans through monthly installments instead of a single payment. The company underwent restructuring in 1981 as Household International Inc. and later acquired Beneficial Corporation in 1998.
Household International offered consumer loans and credit card services throughout the United States, Canada, and the United Kingdom. In October 2002, it agreed to pay US$486 million to settle predatory lending claims brought by attorneys general from 46 U.S. states.
HSBC announced its acquisition of Household International Inc on November 14, 2002, for a purchase price of US$15.3 billion.
2003 to 2010
HSBC completed the acquisition of Household International on March 28, 2003, subsequently merging it in 2005 with one of its subsidiaries to create HSBC Finance Corp. William Aldinger, CEO of Household International, became the highest-paid director in the UK before his departure in February 2005. In March 2009, HSBC chairman Stephen Green publicly acknowledged that acquiring Household International was a strategic error.
In August 2005, HSBC-N.A. revealed plans to acquire Metris Companies, Inc., a credit card issuer focused on the U.S. middle market segment. The transaction was finalized in December 2005 for nearly US$2 billion in cash. HSBC incorporated Metris’s product offerings—including the American DreamCard issued by Direct Merchants Bank—into its existing credit card portfolio.
By 2009, HSBC Finance Corporation had halted new loan originations within its Consumer Lending division but continued managing existing receivables while providing support to mortgage clients. Its U.S.-based Consumer Lending branches operating under HFC and Beneficial ceased accepting new loan applications and began closing locations after fulfilling outstanding customer obligations.
2010 to present
In 2010, HSBC Finance divested its auto loan portfolios to Santander Consumer USA.
On August 10, 2011, Capital One Financial Corp announced it would acquire HSBC's U.S. credit card business for approximately US$2.6 billion to strengthen its domestic credit card operations. This agreement included roughly US$30 billion in credit card assets.
This transaction followed HSBC’s decision to sell nearly half of its U.S. retail branch network—including 195 branches located in New York and Connecticut—to First Niagara Financial Group. These strategic moves were intended to refocus HSBC’s efforts on international markets while retaining a significant presence in the U.S.
Both HSBC and Capital One assured customers that no immediate changes would occur regarding credit card services following the acquisition.
In 2013, HSBC Finance sold its U.S. consumer loan portfolio to Springleaf Financial and Newcastle Investment Corp for $3.2 billion.
In April 2015, HSBC Finance accidentally exposed mortgage customer data from the U.S., including social security numbers, on a publicly accessible web server indexed by Google.
On June 16, 2016, HSBC Finance resolved a shareholder class action lawsuit spanning fourteen years concerning pre-2003 issues predating its acquisition of Household International Inc. The settlement amounted to US$1.575 billion, with an anticipated pre-tax charge of about US$585 million recorded in Q2 2016 covering associated legal costs.
Enforcement and regulatory actions
HSBC Finance and its antecedents have encountered regulatory scrutiny, including accusations that Household Finance placed borrowers into costly loans with hidden prepayment penalties. To settle these claims, Household disbursed $484 million in restitution and amended its lending procedures.
Canada
The Canadian branch of HSBC Finance Corporation, acquired from Household International, collaborated extensively with HSBC Bank Canada. It provided mortgages, personal loans, and insurance products through a network of 75 branches spanning 10 provinces, along with retail partnerships involving merchants such as The Brick and Henry's. HSBC Finance Canada discontinued its operations on March 21, 2012, resulting in the closure of all locations and the layoff of approximately 500 employees.
United Kingdom
In the United Kingdom, HFC Bank functions as a sub-prime consumer lender, originating from roughly 125 Beneficial Finance outlets. Following HSBC’s acquisition, HFC Bank increased cooperation with HSBC Bank plc to enhance cross-selling opportunities. It supplied retail financing for retailers including John Lewis and Currys & PC World. In October 2007, the credit card portfolios of Marbles & Beneficial were sold to SAV Credit. The Financial Services Authority imposed a £1.085 million fine on HFC in January 2008 due to deficient Payment Protection Insurance sales practices. Beneficial Finance had a reputation for aggressive sales methods.
By June 2009, HSBC announced the shutdown of 100 branches—including all six located in Scotland—with remaining branches halting new business before eventually closing. The company’s website confirmed these branch closures beginning in July 2009.
Beneficial and HFC
Operating under the names HFC and Beneficial, HSBC Finance Corporation ranked as the second-largest consumer finance company in the United States, maintaining over 900 branches across 46 states. It provided a range of secured and unsecured real estate loans primarily targeting sub-prime borrowers, while also expanding into products such as auto loans and service plan policies. On March 2, 2009, HSBC stopped accepting new business through HFC/Beneficial and reduced its workforce by 6,100 positions. The firm exited U.S. consumer finance by selling all loan portfolios and transferring servicing responsibilities to external entities.
Scholarship programs are available for children of former Beneficial employees at four Maryland-based colleges: Hood College, Johns Hopkins University, St. John's College (Annapolis/Santa Fe), and Washington College.
Decision One
Decision One, a mortgage subsidiary specializing in real estate secured loans originated via mortgage brokers, was shut down in September 2007 amid the sub-prime mortgage crisis, impacting roughly 1,500 staff members.
HSBC Bank Nevada NA
HSBC Bank Nevada issues credit cards bearing the HSBC brand to customers who hold credit card accounts exclusively as well as clients of HSBC Bank USA.
Private label cards
HSBC was the third-largest issuer of private label credit cards within the U.S., managing partnerships with over 70 merchants including Best Buy, GM, Yamaha, Kawasaki, Neiman Marcus, Polaris Industries, and Saks Fifth Avenue. The majority of this portfolio was divested to Capital One in 2011.
Other
The expertise of HSBC Finance Corporation is also applied in various international markets, including the introduction of Proa by HSBC Bank Argentina and the establishment of new initiatives by HSBC Bank Polska in Poland.