HSBC to pay customers £4m over 'unreasonable' debt collection practices
HSBC has agreed to stump up £4 million to pay back customers subjected to "unreasonable" debt collection practices following a regulatory probe.
The Financial Conduct Authority (FCA) said on Friday that the bank has voluntarily agreed to set up a redress scheme for customers who were left out of pocket after paying unreasonable debt collection charges imposed by HFC Bank Ltd (HFC) and John Lewis Financial Services Limited (JLFS), both part of HSBC.
The regulator said that, between 2003 and 2009, customers of HFC and JLFS who fell into arrears were referred to the firms' nominated solicitors.
However, on referral, the solicitors added 16.4% of the balance to the account as a "debt collection charge". This was deemed unreasonable by the Office of Fair Trading in 2010 as it did not reflect the actual costs of collecting the debt.
Approximately 6,700 customers, the majority belonging to HFC, paid the additional charge prior to 2010 and are potentially entitled to redress.
The FCA also identified certain customers where HFC had miscalculated the interest payable on their loan.
HSBC has identified around 350 customer accounts which were affected by this particular error and has committed to repay the overcharged interest back to them.
In total, HSBC will fork out £4 million in redress and, for each group of customers, the lender will also pay 8% interest per year.
The FCA added that HSBC will proactively contact all affected customers with offers of redress.
A HSBC spokesman said: "This is a historical issue, dating back to the period between 2003 and 2009.
"We have revisited the debt collection charge and as a result a small number of HFC and John Lewis Financial Services Limited customers may be due a refund. We will be directly contacting these customers shortly."