Atlanta: Three Atlanta-area counties have filed a lawsuit claiming that British bank HSBC Holdings Plc cost them hundreds of millions of dollars in extra expenses and damage to their tax bases by aggressively signing minorities to housing loans that were likely to fail.
The Georgia counties’ failure or success with the relatively novel strategy could help determine whether other local governments try to hold big banks accountable for losses in tax revenue based on what they claim are discriminatory or predatory lending practices. Similar lawsuits resulted in settlements this year worth millions of dollars for communities in Maryland and Tennessee.
Fulton, DeKalb and Cobb counties say in their lawsuit, which was filed in October, that the housing foreclosure crisis was the “foreseeable and inevitable result” of big banks, such as HSBC and its American subsidiaries, aggressively pushing irresponsible loans or loans that were destined to fail. The counties say that the crisis has caused them tremendous damage.
“It’s not only the personal damage that was done to people in our communities,” said DeKalb County Commissioner Jeff Rader. “That has a ripple effect on our tax digest and the demand for public services in these areas.”
The city of Atlanta straddles Fulton and DeKalb counties, while Cobb County is northwest of the city. The lawsuit says the banks violated the fair housing act, which provides protections against housing or renting policies or practices, including lending, that discriminate on the basis race, colour, national origin, religion, sex, family status or handicap.
The counties are asking the court to order the bank to stop its behaviour and to take steps to prevent predatory lending in the future.
The lawsuit says predatory lending practices include: targeting vulnerable borrowers for mortgage loans with unfavourable terms; directing credit-worthy borrowers to more costly loans; putting unreasonable terms, excessive fees or pre-payment penalties into mortgage loans; basing loan values on inflated or fraudulent appraisals; and refinancing a loan without benefit to the borrower.
The counties are also seeking financial compensation for the damages they’ve suffered and punitive damages to punish the bank for its “wilful, wanton and reckless conduct.”
The counties say the financial injury they’ve suffered runs to hundreds of millions of dollars.
Andrew Sandler, a lawyer for HSBC and its subsidiaries, said he could not comment on the case.
A federal judge has given the bank until 25 January to respond to the counties’ complaint.
Lawyers for the counties declined interviews on the case, but one of them, Jeffrey Harris, said in an emailed statement that they are continuing to investigate other banks and could file additional complaints. AP