HSBC to Face Cook County Discriminatory Lending Lawsuit

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Litigation predicaments persist for HSBC Holdings plc HSBC .  The Britain-based bank's plea to dismiss the lawsuit filed by Cook County, IL in 2014 was rejected by the U.S. District Judge John Lee in Chicago. The news was reported by Reuters.

The lawsuit accuses HSBC of using discriminatory lending practices toward minority borrowers. The company had sought dismissal of the case on the ground that it was filed very late by Cook County. Also, the bank questioned the county's legal position for claiming compensation under the U.S. Fair Housing Act. However, Lee rejected HSBC's appeal.

Notably, while passing the judgment, Lee wrote, "The county has alleged a widespread scheme of discriminatory lending which involved all the various defendants. This is sufficient to survive a motion to dismiss."

The lawsuit alleges that HSBC was involved in predatory lending practices and provided overcharged (higher fees and interest rates) loans to minority borrowers, leading to an increased number of foreclosures in Cook County, which includes Chicago. Further, the increased number of foreclosures lowered Cook County's revenues from property taxes and at the same time, increased the expenditure for city services on these properties.

Also, Cook County's board president Toni Preckwinkle alleged, "This predatory lending crisis caused tremendous tangible and intangible damage, particularly to African American and Latino communities in Cook County."

Apart from Chicago, several other major U.S. cities including Baltimore, Oakland, Cleveland, Los Angeles, Memphis and Miami had filed suits against major global banks over similar charges. Nonetheless, these cities have seen mixed success in winning compensation from banks including Bank of America Corporation BAC , JPMorgan Chase & Co. JPM , Deutsche Bank AG, Citigroup Inc. C and Wells Fargo & Company.

For HSBC, the failure to win a dismissal of the afore-mentioned lawsuit marks yet another addition to its growing list of legal issues. The company continues to face a number of probes and cases, which is adversely impacting its financials. Nevertheless, despite these negatives, the company is striving hard to improve its performance through restructuring efforts.

Currently, HSBC carries a Zacks Rank #3 (Hold).

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Referenced Symbols: JPM , C , BAC , HSBC

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