The New York Attorney General yesterday filed a lawsuit accusing HSBC’s US operation of ‘brazenly ignoring state law’ when repossessing the homes of cash-strapped Americans.
Although no individuals at HSBC are singled out, the alleged wrong-doing coincides with Niall Booker’s tenure as chief executive of HSBC North America from August 2010 to October 2011.
Part of his job was presiding over the repossession of homes from families who took out high risk loans they could not afford to repay.
Under New York state law homeowners who have fallen behind on their mortgage repayments and face the threat of repossession are entitled to a hearing with the lender.
This provides them with the chance to push for alternatives, such as changes to their loan repayments to allow them to keep their homes. But HSBC is accused of forcing homeowners to wait for months and even years to lodge their appeal.
Yesterday New York Attorney General Eric Schneiderman said ‘companies like HSBC are brazenly ignoring state law, leaving homeowners across New York stuck in a legal limbo’.
An estimated 25,000 New York families are trapped in the backlog, according to records.
Schneiderman has filed a lawsuit in the New York Supreme Court forcing HSBC to pay damages and refund fees and interest.
The lawsuit is embarrassing for HSBC, which is still reeling from last year’s £1.2billion fine from US regulators for money laundering.
But it is also an unwelcome distraction for Booker, who takes the helm at the Co-op Bank next week.
He will have to grapple with an estimated £1billion black hole in the lender’s capital buffer which prompted Moody’s to downgrade it to junk status last month.
This came just weeks after it pulled out of a £750million deal to buy 632 Lloyds branches.
In good news for the Co-op, just over 95pc of Royal London members passed the board’s deal to buy the Co-op’s life insurance and fund management businesses for £219million at an extraordinary general meeting.