HSBC to pay £4m in redress for overcharging customers in arrears

HSBC has voluntarily agreed to pay £4m in redress to customers who were overcharged when they fell into arrears after buying goods on credit.

The Financial Conduct Authority said the bank has offered to set up a fund to repay 6,700 customers who were made to pay an unreasonable debt collection charge imposed by HFC Bank and John Lewis Financial Services Limited between 2003 and 2009.

Customers who fell behind with payments were referred to the firms’ nominated solicitors, who added 16.4% of the balance to the account as a “debt collection charge”.

The watchdog said this was not an accurate reflection of the cost of recovering the money. During its reviews, the FCA also identified certain customers where HFC had miscalculated the interest payable on their loan.

“The FCA announced 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.

“Since that announcement, the FCA has conducted a thorough review of the allegations in respect of HFC and JLFS and has been able to establish that approximately 6,700 customer accounts, the vast majority belonging to HFC customers, paid the debt collection charge prior to 2010, either in full, or in part, and are potentially entitled to redress.”