HSBC 2005 Annual Report Download - page 26

HSBC HOLDINGS PLC
Governance, Regulation and Supervision (continued)
24
comply with this agreement. When HSBC Bank USA
merged with HSBC Bank & Trust (Delaware) N.A. on
1 July 2004, the OCC made the merger conditional on
HSBC Bank USA’s continuing compliance with the
requirements of the written agreement. On 6 February
2006, the OCC determined that HSBC Bank USA had
satisfied the requirements of the written agreement,
and it terminated the agreement.
HSBC’s US consumer finance operations are
subject to extensive state-by-state regulation in the
US, and to laws relating to consumer protection;
(both in general, and in respect of ‘sub-prime’
lending operations, which have been subject to
enhanced regulatory scrutiny); discrimination in
extending credit; use of credit reports; privacy
matters; disclosure of credit terms; and correction of
billing errors. They also are subject to regulations
and legislation that limit operations in certain
jurisdictions. For example, limitations may be placed
on the amount of interest or fees that a loan may
bear, the amount that may be borrowed, the types of
actions that may be taken to collect or foreclose
upon delinquent loans or the information about a
customer that may be shared. HSBC’s US consumer
finance branch lending offices are generally licensed
in those jurisdictions in which they operate. Such
licences have limited terms but are renewable, and
are revocable for cause. Failure to comply with
applicable laws and regulations may limit the ability
of these licensed lenders to collect or enforce loan
agreements made with consumers and may cause the
consumer finance lending subsidiary to be liable for
damages and penalties.
HSBC’s US credit insurance operations are
subject to regulatory supervision under the laws of
the states in which they operate. Regulations vary
from state to state but generally cover licensing of
insurance companies; premiums and loss rates;
dividend restrictions; types of insurance that may be
sold; permissible investments; policy reserve
requirements; and insurance marketing practices.
Certain US source payments to foreign persons
may be subject to US withholding tax unless the
foreign person is a qualified intermediary. A
qualified intermediary is a financial intermediary
which is qualified under the Internal Revenue Code
and has completed the Qualified Intermediary
Withholding Agreement with the Internal Revenue
Service. Various HSBC operations outside the US
are qualified intermediaries.