Thousands more HSBC customers could be due money back on historical loans because of the lender's 'unreasonable' debt collection practices.
Regulator the Financial Conduct Authority today said the bank has extended its redress scheme for customers who may have fallen victim to unnecessarily high debt collection charges imposed by HFC Bank Ltd (HFC) and John Lewis Financial Services Limited (JLFS), between 2003 and 2009.
It follows a "redress scheme" set up by HSBC - which now owns both companies - in 2017, to compensate customers who may have been stung by the charges as many as 16 years ago.
In some cases, fees were as much as 16.4% - which the FCA later deemed was unreasonably high.
The charges were added to loans between 2003 and 2009 - and while it was stopped in 2009, thousands of customers were still ordered to pay it.
The FCA said HSBC has now extended its review into how many customers were affected - which has risen from just under 7,000 to more than 18,000. It means thousands more will be due compensation.
What HSBC did wrong
Between 2003 and 2009, customers of HFC and JLFS who fell into arrears were referred to the firms' nominated solicitors.
On referral, the solicitors added 16.4% of the balance to the account as a "debt collection charge".
This flat rate charge was identified as "unreasonable" by the Office of Fair Trading in 2010, as it did not reflect the actual and necessary costs of collecting the debt.
In November 2010, the OFT imposed a formal requirement on HFC to stop adding a collection charge until it had varied or introduced new terms in its agreements with customers.
HFC and JLFS stopped adding a debt collection charge in November 2009, and in 2010 reversed the charge from all live accounts.
However, an FCA investigation in 2015 found that thousands of customer accounts, the vast majority belonging to HFC, that paid the debt collection charge prior to 2010, either in full, or in part, and are potentially entitled to compensation.
Who is affected?
The FCA estimates that around 18,500 accounts may have been affected by the unreasonable debt collection charges, and are therefore entitled to some form of compensation.
This was from the period between 2003 and 2009, although HSBC says the figure is likely to be somewhat lower as the Debt Collection Charge was in some cases not paid at all.
Customers affected will receive redress where they paid more than the actual and necessary cost of collecting their debt.
How much will customers get?
It is estimated that millions will be paid by HSBC to affected John Lewis Financial Services and HFC Bank customers.
For each group of customers which are due redress, the firm will also pay 8% interest a year.
HFC says it will calculate the refunds due, having established the reasonable costs of recovery for the Debt Collection Charge or, where insufficient data exists, applying the average cost for recovery which has been independently verified by its law firm Eversheds.
Find out if you're affected
The FCA is encouraging anyone who has received a letter in relation to owed payments to get in touch with HSBC at HSBC UK Bank Plc, Business Review Centre, Redcliff Quay, 120 Redcliff Street, Bristol, BS1 6HU .
In addition, any customer who thinks they may have been impacted by these issues should call HSBC directly on 03455 857 564 .
