DALLAS — Neiman Marcus Group and HSBC, which owns the luxury chain’s private label credit card accounts, are battling in court over HSBC’s efforts to increase card charges and interest rates.
The retailer filed a breach of contract suit last month in Dallas County District Court and won a temporary restraining order to prevent HSBC Bank Nevada and HSBC Private Label Corp. from canceling 192,000 accounts that are said to represent potential sales of $500 million in the next two years and from refusing to open new accounts, as well as changing the card terms.
HSBC bought the credit card accounts from Neiman Marcus Group for $640 million in June 2005 under a five-year contract that has provisions for being extended. As part of the deal, Neiman Marcus and Bergdorf Goodman stores agreed to accept only American Express and its private label cards, which number more than 1.9 million.
The suit alleged that last year HSBC said it wanted to change credit card terms because it stood to lose more than $8.5 million over a three-year period. The lawsuit did not specify the reasons for the losses, but stated: “In short, HSBC felt that it made a bad deal in buying the credit card accounts.”
In September, HSBC proposed increasing charges and interest in order to reap $14.5 million more revenue over the three years, according to the suit.
Neiman’s rejected the plan and suggested an alternate restructuring in December. HSBC refused the offer in January and threatened to implement the changes and credit card cancellations on or about Feb. 15, the suit said. The retailer depends on private label credit card transactions for more than half of all sales, which totaled $4.39 billion last year.
Cancellation of the cards would cause “incalculable damage” to Neiman’s reputation and customer goodwill, the suit said.
Both Neiman Marcus and HSBC declined to comment on the litigation, spokeswomen said.