In mid-March, dealers in New England (Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut), Pennsylvania, New York and Kentucky received notice from HSBC alerting them that the finance company was terminating business with them. While the finance company discontinued business with some dealers in select states, it discontinued business altogether in other states.

While HSBC has yet to issue a press release on the recent termination of dealers and states, according to a source from high inside HSBC who requested anonymity, these terminations coincided with the termination of 200 HSBC employees, of which approximately 18 were field representatives. The source added that no further cutbacks are expected at this time.

The facts from HSBC are confusing (at best) currently. The Dealer Enrollment page of www.hsbcdealer.com, states, “We do not purchase contracts from dealerships located in the following states and territory: Alaska, Arkansas, Connecticut, Maine, Massachusetts, Michigan, Minnesota, Mississippi, New Hampshire, New York, Rhode Island, Vermont and Puerto Rico.” While HSBC’s Fact Sheet, dated August 2007, states that HSBC Auto Finance “purchases consumer contracts from thousands of active dealers in 47 states.”

While Pennsylvania isn’t included in that list on the HSBC Dealer site, Keith Meyers, special finance manager at Buchanan Auto Park in Waynesboro, Pa., was one of the dealers informed that HSBC would no longer be doing business with them. He said, “HSBC just terminated us without notice and I cannot contact my rep.”

Rich Snyder of Allstar Auto Sales in Marlborough, Mass., experienced a strikingly similar situation. He said, referring to HSBC, “They just cut us off Monday out of the blue, and I cannot contact a rep.” Prior to the termination, Snyder said working with the company over the past “several months” had been “difficult.” He admitted he was having “trouble trying to figure out what they wanted, what they will buy.”

In Central City, Ky., Micah Mohon, special finance manager at Pogue Chevrolet, was alerted that his state would no longer have a field representative and that all contacts would now be done via telephone. While HSBC is still accepting deals from Pogue Chevrolet, Mohon said, “I’ve noticed over the past few months, they’ve not been buying like they used to.” However, he’s heard the finance company has discontinued business with other Kentucky dealers.

Shirrell Mynear, special finance manager at Cross Chrysler Jeep in Louisville, Ky., confirmed that rumor. He received a termination notice via fax from HSBC sometime in late February to mid-March. “Last year, they sparsely bought,” said Mynear, “When they did buy, they weren’t competitive.” In 2007, he estimated he sent four deals to HSBC for the entire year; in previous years, he’d send between one and four deals each month.

The anonymous HSBC source also said this decision has been in play for two months and the states that were chosen for termination were selected based on the performance of their paper, as well as economic factors within those states. For the remaining states, the source claims business will continue.

For more information on this matter, keep an eye out for the April issue of Special Finance Insider (SFI). If you not currently receiving SFI, please call 888.300.8844 to request a free subscription.