HSBC credit card compensation bill could rise to £11m

HSBC extends scheme to extra 18,500 customers overcharged on debt payments

HSBC is expected to pay out millions more in compensation to credit card customers who were overcharged when they fell behind with payments.

The bank has already paid out around £4m to 6,700 people who held credit cards with John Lewis Financial Services (JLFS) and HFC Bank, both of which are now part of HSBC.

The Financial Conduct Authority (FCA) said on Thursday HSBC was extending the compensation scheme and had written to a further 18,500 people who had not previously been contacted. These are people “who either have, or may have, paid unreasonable debt collection charges”, said the regulator.

Based on the previous compensation scheme, this would suggest a further payout of £11m if all of the 18,500 people benefit. However, the whistleblower who was arguably responsible for triggering the payouts said he believed the total number affected would be far higher.

The case involves JLFS and HFC customers who were struggling with their credit card payments. The FCA said that between 2003 and 2009, those who fell into arrears were referred to the firms’ solicitors, at which point JLFS and HFC 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 costs of collecting the debt.

The 2017 announcement that a £4m compensation scheme was being set up represented a victory for Nicholas Wilson, who has devoted 16 years to pursuing this issue. Wilson said that in 2003 he told HFC that what it was doing was “illegal”. He has always claimed that hundreds of thousands of people were overcharged, though this has consistently been rejected by HSBC and the authorities.

Wilson, 62, originally complained to the FCA’s predecessor the Financial Services Authority, which ruled the matter outside its remit. Undeterred, Wilson approached the newly created FCA, but it decided to take no action.

Wilson then complained to the Office of the Complaints Commissioner, which in a 2015 ruling said the FCA had presided over a series of events “bordering on the farcical”, was “negligent” and “defensive”, and had even tried to “shift blame” on to Wilson.

After the ruling the FCA announced a rethink, and in February 2017 HSBC began a voluntary redress exercise.

In its latest statement, the FCA said HSBC had voluntarily agreed to extend its compensation scheme, and had written to the 18,500 customers in May this year.

“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 … invited to share their recollections. Customers will be compensated where their recollections indicate they have paid unreasonable debt collection charges,” said the FCA.

Wilson said he believed the true total figure for the unreasonable charges was £200m. He added that while “25,000 people might get some money back, that is far, far short of the true figure”.

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HSBC said: “Doing the right thing by HFC customers who paid unreasonable debt collection charges during the period 2003-2009 is an important undertaking for us.

“Earlier this year we expanded our review to identify further HFC customers who may be eligible for reimbursement through a broader and more complex investigation of third party records. We have written to those customers identified through this process and encourage them to contact us in response. They can call our dedicated phoneline on 03455 857 564.”

A spokesman for John Lewis Finance said: “We are disappointed that this has happened to a very small number of John Lewis Financial Services customers and we are assured by HSBC that this historic issue has been resolved.”


Rupert Jones

The GuardianTramp

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