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HSBC to provide £4m redress for ‘unreasonable’ debt collection charges
HSBC has voluntarily agreed to pay out around £4m in redress to thousands of customers who were affected by an “unreasonable” debt collection scheme between 2003 and 2009.
Some 6,700 customer accounts which had fallen into arrears are said to have paid a 16.4% debt collection charge, which was charged by solicitors instructed by HFC Bank and John Lewis Financial Services (JLFS) – now part of HSBC Bank.
In 2010, the Office of Fair Trading (OFT) deemed the charge unreasonable, as it did not reflect the actual and necessary costs of collecting the debt. In November of that year, the OFT placed a formal requirement on HFC to stop adding the charge until it had varied or introduced new terms in its agreements with customers. JLFS did not come under the scope of the OFT’s review despite carrying out similar practices.
All charges were reversed from live accounts in 2010 after HFC and JLFS stopped adding the fee.
Following a complaint to the Complaints Commissioner in December 2015, the Financial Conduct Authority (FCA) conducted a review and established that around 6,700 accounts were potentially entitled to redress. Customers will now receive redress where they paid more than the actual and necessary cost of collecting their debt.
A small number of customers will also receive a rebate after the reversal of the debt collection charge in 2010 meant their account was placed in credit which was subsequently not returned to them.
A further 350 customer accounts will be repaid overcharged interest which was miscalculated by HFC.
For each group of customers which are due redress, the firm will also pay 8% interest per annum.
The FCA confirms there is no need for customers to take any action on this issue as HSBC will proactively contact all affected customers with offers of redress. HSBC said it will also implement a ‘direct customer contact line’ which will be available from late February.
An HSBC spokesperson, 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.”
