Why has HSBC really paid likely 100,000s people £100s in refunds and compensation? And could it owe even more?
Former and existing HSBC, First Direct, John Lewis Finance and M&S Bank customers have been receiving payments from HSBC Banking Group – which the lenders come under – out of the blue over the past 10 months, and we still haven't really been told why. We've been pushing HSBC for answers and have put questions to the bank from ourselves and a former whistleblower to find out what's going on.
We don't know exactly how many people are affected by this; we're guessing it's 100,000s as we've had so much feedback on it. Yet HSBC won't tell us, so we could be wrong, and HSBC not telling us is a theme you'll see throughout this article. Sometimes though, silence can be as telling as answers.
We first revealed in December 2020 that some people who'd been in arrears between 2010 and May 2019 on various financial products, including mortgages, overdrafts, credit cards and loans, had received cheques out of the blue for between £25 and £100. Some had almost binned these, thinking they were a scam, and some have since had payouts of up to £7,000.
Details on why people are receiving payments and how these have been calculated have been scant, with HSBC and the financial regulator – which has told us it's aware of the redress scheme – remaining tight-lipped. But without these details, concerns have been raised by a former whistleblower, Nicholas Wilson, that people could be missing out. HSBC disputes this, saying it's contacting everyone affected.
Mr Wilson has doggedly campaigned for years on behalf of customers of HFC Bank and John Lewis Financial Services Ltd, some of whom between 2003 and 2009 were charged a 16.4% 'debt collection charge'. (Both HFC Bank and John Lewis Financial Services Ltd are now owned by HSBC.)
In 2010, the Office of Fair Trading ruled that these fees were unreasonable and did not reflect the actual cost of collecting the debt. In 2017, HSBC set aside £4 million to repay affected customers, and in 2019, following Mr Wilson's campaigning, it conducted a further review to contact customers newly identified as having been affected. HSBC has explicitly denied its current redress scheme is linked to this scheme, or to the 16.4% debt collection charge.
We put a series of questions to HSBC, some kindly suggested by Mr Wilson, to try to find out more. Here are its answers (in some cases where we had to ask follow-ups, we've collected its answers on each question into one, and we've also provided some context where helpful)...
Question: Why exactly are customers being compensated and refunded interest and charges?
Answer from HSBC: "This review across HSBC and its brands relates to customers who were in arrears between 2010 and 2019 and identified that some did not receive a good customer experience from our financial distress teams. As part of this separate exercise we have proactively contacted all customers affected to let them know about instances where historically we could have managed their indebtedness better.
"Examples where redress has been sent to customers include cases where letters that were unclear or poorly worded which are now considered to be disengaging, where greater forbearance could have been provided and where a customer could have benefitted from additional support at the time and where expressions of dissatisfaction may have been overlooked.
"Each case has been looked at individually and an appropriate level of redress decided upon based on different factors. We consider the redress to be fair compensation for the relevant affected customers.
"[Fees which have been refunded] may include a late payment fee on a card or interest on a loan, for example."
MoneySavingExpert.com's (MSE's) explanation: HSBC had already confirmed it was making two sets of payments as the result of an internal review:
- The FIRST set of payments were for compensation for poor service, and ran from October 2020 to March 2021. Some customers were posted goodwill cheques worth between £25 and £100, depending on the level of poor service. HSBC wouldn't originally give us full details of what it did wrong, though it said as an example that some customers could have been compensated for poorly-worded letters that didn't engage those who might have been struggling.
- The SECOND set of payments were to refund interest and charges, and is still ongoing. HSBC originally told us 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. They're also getting an additional 8% interest on top. We've heard of refunds ranging from £245 to over £7,000.
Q: Is the redress scheme in any way connected to HSBC's previous 2017-19 redress scheme for customers impacted by historical debt collection practices?
A: "This remediation programme is not connected to the HFC debt collection charge matter."
Q: Are the latest refunds for a 16.4% debt collection charge, and did HSBC continue to levy this charge after 2010?
A: "No, this is not correct."
Q: How has redress been calculated?
A: "The different factors include, but are not limited to: time spent in arrears, the value of the arrears, the products held, the journey or experience in their dealings with HSBC."
Q: Are customers who've been contacted as part of the latest redress scheme potentially entitled to further refunds or compensation? If so, how do they know if they are and what should they do?
A: "We have identified all impacted customers and are in the process of contacting them. Customers do not need to do anything.
"All customers we write to are provided with a dedicated contact number for any queries or complaints, and we explain the circumstances in which they might want to contact us – there is nothing else required of them."
Q: Is the redress scheme still ongoing?
A: "Yes. Our primary mailing is virtually complete with very low volumes being sent in the coming months. As we have said previously, we will also be issuing follow-ups where the first cheque hasn't been cashed. This will be fully complete by the end of November."
Q: In HSBC's 2020 annual report, there is a reference to "an investigation by the Financial Conduct Authority in connection with collections and recoveries operations in the UK". What does this relate to?
A: "We have nothing to add to our disclosure in the annual report."
MSE's explanation: HSBC has always stressed that payments under this scheme were being made following an internal review, but it's never confirmed or denied Financial Conduct Authority (FCA) involvement. However, the bank's latest financial results reveal that the FCA has launched an investigation into HSBC's "collections and recoveries operations", although it's not clear precisely what that relates to.
The FCA separately told us it's aware of HSBC's 2020/2021 redress scheme but declined to comment further.
A little more detail has emerged in a letter sent from the FCA to Nicholas Wilson in June 2021 seen by MoneySavingExpert.com. In it, the FCA reveals the ongoing redress programme is "being monitored by the dedicated Supervision team in Retail Lending".
The letter from the FCA to Mr Wilson adds: "HSBC outlined that in some historic cases where consumers were in arrears, they fell short of their commitment to do the right thing at times. For example, where they did not receive a good customer experience, which could have included instances where the application of fees and charges could have been frozen, or poorly-worded letters were sent which are now considered to be dis-engaging. HSBC have taken action to put that right and remediate consumers who may have been impacted."
Q: How much has been paid out in total?
A: "We are unable to disclose this."
MSE's explanation: HSBC has previously refused to tell us how much is being paid out under its latest redress scheme. But a line in its financial results from February 2021 reveals that, as of 31 December 2020, it had set aside a total of £223 million to pay redress to customers following a review of "historical collections and recoveries practices in the UK".
Q: Does the £223m include former redress schemes as well as the latest?
A: "We are unable to provide any further detail or breakdown on this figure, but can confirm that a nominal amount of that relates to the costs associated with the remediation exercise specifically on the HFC brand, which is coming to an end."
Unhappy with HSBC's response? Ask for more details
HSBC told us it believes it has identified all impacted customers and is in the process of contacting them, so it says you do not need to do anything. And if you've received a cheque or payment from HSBC out of the blue, you may well be happy just accepting it, especially if you weren't expecting to receive anything – we think that will be most people's response.
However, if you do want a further explanation of what it is for, you can reply to HSBC saying that you accept the payment but don't want this to limit your ability to claim future redress for the same issue. That way, you can write to HSBC asking for more information in the meantime – and potentially leave yourself able to make a further complaint.
If you're unhappy with the response you get from HSBC or if you don't get one within eight weeks, you can take your complaint to the free Financial Ombudsman Service.
'The lack of answers is frustrating'
Martin Lewis, founder of MoneySavingExpert.com, said: "People have been paid out after mistreatment by the HSBC Group. That's good. They've also been paid out for miscommunication by the HSBC Group. That's good too.
"Yet part of natural justice surely is to understand exactly how and why you were wronged, in case you're not happy with the refund and the compensation, and want to take it further. None of this is easy to work out. While we've uncovered a little, the whole thing still has an opaque mist surrounding it – no surprise whistleblowers like Nicholas Wilson have raised suspicions; without full transparency how can we really understand what's gone on?
"There may be a chance – and I'm guessing here – that some of this may be due to an ongoing investigation that can't be talked about, and the answers hopefully will be revealed in the future. Yet redress without full explanation leaves a strange taste in the mouth."