HSBC is to pay around £4m in redress to customers who might have paid an unreasonable debt collection charge through its subsidiaries HFC Bank and John Lewis Financial Services.
The FCA says HSBC voluntarily agreed to set up the redress scheme following a review carried out by the regulator.
Between 2003 and 2009, customers of HFC and John Lewis Financial Services who fell into arrears were referred to the firms’ solicitors who added 16.4 per cent of the balance to the account as a debt collection charge.
The Office of Fair Trading identified the charge as unreasonable in 2010. According to a statement from the FCA, HFC and John Lewis Financial Services stopped adding a debt collection charge in November 2009, and in 2010 reversed the charge from all live accounts.
The FCA said in December 2015 that it would reconsider its decision not to investigate allegations about the conduct of HFC following a complaint to the Complaints Commissioner.
Through a review, the FCA found that around 6,700 customer accounts – most belonging to HFC customers – paid the debt collection charge before 2010 and were potentially entitled to redress.
Those customers will receive redress where they paid more than the “actual and necessary cost” of collecting their debt.
For a small number of customers, the reversal of the debt collection charge in 2010 meant their account was placed in credit which was not returned to the customer. Those customers will be refunded the credit amount.
During its review, the FCA also discovered HFC had miscalculated the interest payable on some customers’ loans. HSBC says around 350 customer accounts were affected by this error and has committed to repaying the overcharged interest to these customers.
The FCA estimates approximately £4m will be paid by HSBC in redress to affected customers. For each group of customers which are due redress, the firm will also pay 8 per cent interest per annum.
An 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.”