HSBC, First Direct, M&S or John Lewis bank customer? They're making MORE payments to those in arrears in the past – some worth £1,000s

Both sets of payments relate to HSBC, First Direct, M&S Bank and John Lewis Finance customers who between 2010 and May 2019 were in arrears on any kind of financial product, including mortgages, overdrafts, credit cards and loans. The financial regulator generally defines credit arrears as any shortfall in one or more payments due, while for home mortgages it's a shortfall equivalent to two or more regular payments.

HSBC Banking Group, which all four lenders fall under, says the payments are as a result of an internal review which found that it had communicated poorly with some customers and that some had paid interest and charges when they shouldn't have. Crucially, you may be eligible for both, neither or either one of the two schemes. Here's how they work:

• The FIRST redress scheme was for compensation for poor service, and ran from October 2020 to March 2021. As MoneySavingExpert.com revealed in December 2020, some customers were posted goodwill cheques worth between £25 and £100, depending on the level of poor service. These began to be sent in late October 2020, with the last arriving in late March 2021. 

  HSBC won't tell us exactly which customers in arrears were due payment under this first redress scheme or full details of what it did wrong, but it says examples of bad practice, which it compensated customers for, include poorly worded letters that didn't engage those who might have been struggling. 

• The SECOND redress scheme is to refund interest and charges, and is ongoing. Some customers who incurred interest or other fees while they were in arrears that they shouldn't have had to pay are now having them refunded, and are also getting an additional 8% interest on top. Refunds are being sent as cheques or in some cases, if HSBC has your details, will be paid directly into your bank account. HSBC says most payments have now been made but some will continue to be paid over the coming months. 

  HSBC won't tell us exactly who is affected or how much average payments are worth, but we've heard of refunds ranging from £245 to over £7,000.

While HSBC won't give us an indication of how many people are getting payments under the two schemes, the four brands currently have 14 million active UK customers between them – plus there are those who have already closed accounts on top. If you're struggling with arrears and need help, see our Debt Problems guide.

'I got £25 from HSBC – then a cheque for over £7,000'

We were first alerted to the second redress scheme by John Bunyan, 62, from Norwich. John, who is retired, initially received a £50 cheque out of the blue from HSBC. But he then received a further payment from HSBC for £345 directly into his bank account. 

Since we first published this story on 27 April, we've received a dozen emails from MoneySavers who have also had a second refund from the HSBC Group, in many cases of £1,000+, as well as reports in our forum. Here's one of the biggest refunds we've seen: 

You don't need to do anything if owed – but DON'T bin a cheque by mistake

HSBC says borrowers don't need to do anything to get money they're owed under either redress scheme. It says if you're due a payment it will get in touch, and that includes if you've since left the banks in question.

However, if you think you're affected and don't hear anything in the next few weeks, you can find how to get in touch with the banks on the HSBC, First Direct, M&S Bank and John Lewis Finance websites. 

Be aware that HSBC will automatically take income tax at the basic rate (20%) from the 8% interest you receive. This may mean you need to reclaim it, if eligible, via HM Revenue & Customs using an R40 form. 

MSE founder Martin Lewis warned people against accidentally throwing away cheques from HSBC on ITV's The Martin Lewis Money Show in January, after one borrower almost threw his away thinking it was a scam. You can watch the clip below, although bear in mind Martin didn't know about the second scheme at the time. 

The clip above lasts 58 seconds and has been taken from The Martin Lewis Money Show on Thursday 14 January, courtesy of ITV Studios Ltd, all rights reserved. You can turn on subtitles by clicking the closed captions icon at the bottom right of the video.

However, while these payouts are entirely legitimate, it's always worth being wary of scams if you're contacted out of the blue. If you receive an unexpected cheque or payment, make sure that the details on the letter relate to an account you actually have or had. If you're in any doubt, contact the bank to check – and find the number for yourself rather than relying on details in the letter.