HSBC has voluntarily agreed to extend its redress scheme for customers who may have lost out by paying an unreasonable debt collection charge imposed by HFC Bank and John Lewis Financial Services (JLFS) the Financial Conduct Authority (FCA) has announced. Both HFC and JLFS are now part of HSBC UK Bank.
The redress scheme relates to customers of HFC and JLFS between 2003 and 2009 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% 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 has told us that HFC and JLFS stopped adding a debt collection charge in November 2009 and in 2010 reversed the charge from all live accounts.
The FCA took over regulation of consumer credit in April 2014. It initially decided not to investigate allegations about the conduct of HFC but it announced in December 2015 that it would reconsider its decision following a complaint to the Complaints Commissioner. Following this, in February 2017 HSBC began a voluntary redress exercise in order to compensate customers where they had paid more than the actual and necessary cost of collecting their debt.
On 26 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. HSBC confirmed that in May 2019 approximately 18,500 customers who had not previously been contacted were written to as part of this process.
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.