Thousands of customers of HFC Bank and John Lewis Financial Services, which are both now part of HSBC, are due redress after the firms overcharged people in debt.
Between 2003 and 2009, customers of HFC and John Lewis who fell into arrears were referred to the firms’ nominated solicitors who added a 16.4% “debt collection charge” to the balance.
The firms stopped using this flat rate fee in November 2009, after the now defunct Office of fair Trading (OFT) deemed it “unreasonable” as it didn’t reflect the actual cost of collecting debts.
But the Financial Conduct Authority (FCA) has announced that approximately 6,700 customers who paid this fee, in part or in full, will have their accounts reviewed to check if they paid more than the actual cost of collecting their debt – where they have, they’ll be refunded.
The FCA says this mainly affects HFC customers. It adds that it’s agreed a methodology for what constitutes a fair cost with HSBC, but it wouldn’t tell us what this would be.
In addition, for a “small number of customers”, the removal of the debt collection fee in 2010 meant their account was placed in credit, which was not returned to them. The FCA says affected customers will receive a rebate of this credit amount.
A further 350 HFC customers whose interest was miscalculated on their loan will receive a refund of the overcharged interest.
Each group of customers due redress will receive 8% annual interest on whatever they’re owed.
In total, it is estimated that approximately £4 million will be paid by HSBC in redress to affected customers.
Affected customers don’t need to do anything, as they’ll be contacted by HSBC between February and August – regardless of whether they’re still customers or not. HSBC says it will also launch a direct customer contact line from late February.
An HSBC spokesperson adds: “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.”