HSBC sets up debt collection redress scheme

FCA has announced that HSBC has voluntarily agreed to set up a redress scheme for customers who may have suffered detriment by paying an unreasonable debt collection charge imposed by HFC Bank Ltd (HFC) and John Lewis Financial Services Limited (JLFS), both of which are now part of HSBC.  Between 2003 and 2009 HFC and JLFS referred customers who were in arrears to nominated solicitors who added 16.4% of the balance to the account as a “debt collection charge”. Following OFT action in relation to HFC both entities stopped adding a debt collection charge in late 2009 and then reversed the charge from all live accounts. FCA decided in December 2015 that, contrary to its previous view, it would review the allegations in respect of both HFC and JLFS. It identified 6,700 customer accounts (mostly HFC), where customers paid the debt collection charge before 2010 and are potentially entitled to redress, and a small number of accounts which were placed in credit following reversal of the charge but where the credit was not returned to the customer. Additionally, HFC had miscalculated interest payable on loans on around 350 accounts and is now due to repay the customers the overcharged interest. HSBC has agreed with FCA to contact all affected customers with offers of redress, which will include interest.