HSBC has agreed to pay $1.58bn (£1.11bn, €1.4bn) to resolve a US shareholder class action lawsuit that was filed in 2002. The lawsuit had stemmed from HSBC’s 2003 acquisition of US subprime group, Household International.

The 14-year-old lawsuit by Household’s shareholders alleged that the company and a few of its employees such as former chief executive William Aldinger, chief financial officer David Schoenholz and Gary Gilmer, president of consumer lending, had made many false and misleading statements. These were related to the company’s lending practices, the quality of its loan portfolio and its financial results and were said to have helped in inflating the company’s share price.

The lawsuit also alleged that Household, which is now called HSBC Finance, had not disclosed the quality of its loan portfolio. Just prior to the HSBC acquisition, Household had agreed to shell out $484m to settle legal charges that it used predatory borrowing practices in more than a dozen US states. These practices are alleged to have been used to deceive customers into paying extraordinarily high interest rates. The agreement to settle the legal charges had led a decline in Household’s share price by more than 50% from mid-2001 to October 2002.

In October 2013, the shareholders were awarded a $2.46bn judgment against HSBC, which had been defending itself against the shareholder claims since the acquisition. However, the federal appeals court in Chicago threw out the award in May 2015 and ordered a new trial.

While the current settlement was reached on Thursday (16 June), it is still subject to court approval. The London headquartered bank said it will incur a pre-tax charge of about $585m in the second quarter because of the settlement.

HSBC spokesman Rob Sherman said: “We are pleased to resolve this 14-year case that’s based on events that took place before HSBC acquired Household.” James Glickenhaus of Glickenhaus & Co, one of three lead plaintiffs said: “The mills of justice grind slowly, but sometimes they do grind exceedingly fine.”

HSBC, which acquired Household for about $14.2bn, saw almost $10bn in profits in the first few years after the takeover. However, the bad loans from the acquisition started to increase in 2006, forcing HSBC to shut most of its US consumer finance business after the financial crisis hit in 2009.