Money & Banking

HDFC Bank could face class-action lawsuits for ‘misleading investors’

Our Bureau | | | Updated on: Dec 06, 2021

The bank’s vehicle lending practices have come under the scanner | Photo Credit: Vijay Soneji;Vijay Soneji - Vijay Soneji

Auto loan practices, disclosures under lens; lender says claims are ‘prima facie frivolous’

Two American law firms have initiated separate investigations into allegations against HDFC Bank that can potentially result in class action suits against the lender.

New York-based Rosen Law Firm, a global investor rights firm, said it is preparing a securities lawsuit on behalf of HDFC Bank shareholders resulting from allegations that the lender may have given materially misleading business information to the investing public. Last year, the law firm had initiated a class action suit against Infosys.

Los Angeles-based Schall Law Firm, a shareholder rights litigation firm, said that its “investigation focuses on whether the company issued false and/or misleading statements and/or failed to disclose information pertinent to investors.”

The investigations by the law firms focus on two main issues — allegations of improper lending practices at the bank’s auto loan division and reports claiming that HDFC Bank was late in providing details of loans.

Improper practices

Last month, it had come to light that HDFC Bank had probed allegations of improper lending practices and conflict of interest in its vehicle-financing operations, leading to the exit of Ashok Khanna, who was heading the auto loans business. According to reports, car loan borrowers were compelled to buy GPS devices bundled with their loans.

Rosen Law Firm said once the allegation became public, prices of HDFC Bank's American Depositary Receipts fell $1.37 per share, or 2.83 per cent, to close at $47.02 per share on July 13.

HDFC Bank had then said the executive concerned was on an extension of service and retired on March 31, 2020 in the normal course of employment. “The bank has a well-established process of investigating every complaint it receives, and takes action as appropriate. In the said instance as well, the bank has followed the due process,” it had said, but did not disclose the details of the probe.

Earlier this month, Bloomberg had reported that credit information bureau Experian’s India unit had informed the RBI that HDFC Bank was late in providing details of its loans, including the repayment status of millions of retail borrowers.

Credit worthiness of borrowers depends on data from credit bureaus like Experian. The report had said that such delays had been an issue for about two years, although HDFC Bank denied this.

‘Frivolous, prima facie

Commenting on the law firms’ claims, HDFC Bank said in a statement: “We were unaware of any such development (class action lawsuit) till we heard about it from the media a little earlier today. We’ll examine and respond to it as appropriate. Prima facie, it does look frivolous as we believe we have been transparent in our disclosures.”




Published on August 17, 2020
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