Class Action Against HSBC Settles for $23.5 Mil.

A $23.5M settlement has received preliminary approval from a federal judge in Philadelphia in a class action lawsuit against HSBC Bank, Esslinger v. HSBC Bank Nevada N.A. The bank has been accused of using deceptive tactics to sell payment protection plans to its customers.

If granted final approval, the settlement would be the fourth of its kind nationwide against credit card companies over payment protection plan schemes. The service supposedly is intended to provide customers with a way to defer payments under certain circumstances. Card companies typically charge 89 cents for every $100 of their credit balance. However, not everyone is eligible for the program, including those who are self-employed, are seasonal employees, those who are over the age of 65, and retirees. The lawsuit noted that customers are never asked if they fall into any of these categories when the credit card company is trying to sell the plan, but that they will still accept the money.

Golomb Legalis one of three lead counsel in this case. They and other firms have successfully reached settlements in class actions in Illinois ($10.5M against Discover) and Florida ($20M against Chase and $60M against Capital One) alleging similar misconduct. Golomb Legalis one of several firms that have sued the nation’s largest credit card companies over the past 3.5 years. While many of these cases did not take long to settle, negotiations have become more difficult in some of the cases since the Supreme Court ruled that mandatory arbitrations in class actions were acceptable under the Federal Arbitration Act.

Attorney Golomb has said that while not an issue in the HSBC case, some other defendants are fighting for arbitration in other cases before circuit or district courts.

In this case, potential class members total 11 million, split into three groups. According to Attorney Golomb, the group that stands to make the most money from the settlement include those who were ineligible under the terms of the payment protection plan who were charged for services. The second group includes those who were “tricked” into signing up for the service when they were talked into it while trying to activate a new credit card. The third group is comprised of those who did sign up for the plan, but wish they had not now that they know how it really works.

Court documents indicate that the bulk of payouts will be between $15 and $60 per customer, with no class member receiving more than $150.

Julia B. Strickland of Stroock & Stroock & Lavan represents HSBC in the case. The plaintiffs are represented by Golomb Legal, P.C., Taus Cebulash & Landau of New York, and Nagel Rice of New Jersey.