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HSBC customers due compensation for unreasonable debt collection charges

Written by: Emma Lunn
Did you have a loan from HFC or John Lewis between 2003 and 2009? You could be due a pay-out.

About 18,000 more HSBC customers could be due money back on historical loans because of the lender’s “unreasonable” debt collection practices.

The Financial Conduct Authority (FCA) said the bank has extended its redress scheme for customers who may have fallen victim to unnecessarily high fees imposed by HFC Bank and John Lewis Financial Services (JLFS) between 2003 and 2009. Both HFC and JLFS are now part of HSBC Bank.

The move follows a redress scheme set up by HSBC in 2017, to compensate customers who may have been stung by the historical charges. The scheme saw HSBC voluntarily agree to pay about £4m in redress to thousands of customers.

High charges for customers in arrears

Between 2003 and 2009, customers of HFC and JLFS who fell into arrears were referred to the firms’ nominated solicitors. On referral, HFC and JLFS levied a charge to the account representing 16.4 per cent of the balance as a “debt collection charge”.

The flat rate charge was identified as unreasonable by the Office of Fair Trading (OFT) 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. JLFS was not within the scope of the OFT’s review but was carrying out similar practices to HFC.

HSBC told the FCA that HFC and JLFS stopped adding a debt collection charge in November 2009 and in 2010 reversed the charge from all live accounts.

The HSBC review

In April 2019, the FCA announced that HSBC was expanding its review to identify and compensate further customers who either have or may have paid unreasonable debt collection charges. In May 2019 HSBC confirmed to the regulator that about 18,500 customers who had not previously been contacted were written to as part of this process.

HFC and JLFS customers will be compensated where the records indicate they paid unreasonable debt collection charges.

Where the records show that customers paid their outstanding debt but do not determine whether debt collection charges were applied and paid, customers will be written to and invited to share their recollections. Customers will be compensated where their recollections indicate they have paid unreasonable debt collection charges.

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