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(Adds comments from HSBC, background, case citation, byline)
By Jonathan Stempel
June 16 (Reuters) - A unit of HSBC Holdings Plc said on Thursday it will pay $1.575 billion to end a 14-year-oldshareholder class action lawsuit stemming from the HouseholdInternational consumer finance business that the British bankbought in 2003.
HSBC Finance Corp expects to take a roughly $585 millionpre-tax charge in the second quarter for the settlement, whichrequires court approval. It said it could have faced liabilityas high as $3.6 billion.
The accord averts a second trial in the litigation, whichhad been expected to begin last week in the U.S. District Courtin Chicago before being put on hold.
"We are pleased to resolve this 14-year case that's based onevents that took place before HSBC acquired Household," HSBCspokesman Rob Sherman said in a statement.
Michael Dowd, a lawyer representing the plaintiffs, did notimmediately respond to requests for comment.
In litigation that began in 2002, Household shareholdersaccused that company of inflating its share price by concealingits poor lending practices and loan quality.
The share price fell more than 50 percent from mid-2001 toOctober 2002, when Household agreed to pay $484 million tosettle predatory lending claims by U.S. state regulators.
HSBC began defending against the shareholder claims afterbuying Household for roughly $14.2 billion.
In October 2013, the shareholders won a $2.46 billionjudgment against HSBC, believed to be the largest in a U.S.securities class action that went to trial.
But in May 2015, the federal appeals court in Chicago threwout that award and ordered a new trial to determine whether"firm-specific, nonfraud factors" contributed to the drop inHousehold's share price.
HSBC's purchase of Household eventually soured, and led totens of billions of dollars of writedowns for bad loans. Thebank shut much of its U.S. consumer finance business in March2009.
The case is Jaffe et al v Household International Inc et al,U.S. District Court, Northern District of Illinois, No.02-05893. (Reporting by Jonathan Stempel in New York; editing by DianeCraft and Dan Grebler)
