HSBC has recently introduced its own compensation scheme. This move is intended to help redress the complaints of consumers affected by its previous aggressive debt collection practices. The hard-hit communities program is meant to reach those who the bank charged too much in consumer financial fees from 2003-2009. Over this time period, HSBC and its subsidiary HFC charged a “debt collection charge” of 16.4%. This surcharge was levied on the accounts of ratepayers who had delinquent bills. HSBC’s decision is an encouraging step towards righting these wrongs. To date the bank has contacted approximately 18,500 customers through the bank’s redress program.
Within this payout structure, thousands of people just received surprise checks in the mail, usually for small sums, such as £25-£100. HSBC has set aside a massive £223 million for the redress scheme. This funding follows an internal review, which was especially looking at the way the bank served customers in financial distress. The scheme has not yet been publicly announced, it’s days away from being completed.
Background of the Compensation Scheme
The compensation program comes after years of consumers lodging complaints against HSBC’s aggressive debt collection practices. Between 2003 and 2009, hundreds of thousands of customers were left shouldering the burden of greatly increased rates that worsened their personal economic struggles. Nicholas Wilson, a whistleblower who has fought against such practices since 2003, noted that the bank was operating illegally. His diligence was crucial in establishing the need for accountability for the high-cost fees charged to credit card borrowers.
HSBC’s independent consultant review found that the bank had, in fact, failed at every possible level of delivering appropriate customer service to borrowers in default. In a statement, an HSBC spokesperson remarked,
“We always strive to do the right thing by our customers. Regrettably, we have identified some historic cases of customers in arrears where we fell short of this commitment. Where they did not receive a good customer experience, we have taken action and offered redress to put that right.”
Even the government’s Office of Fair Trading found HSBC’s flat-rate charge to be unfair back in 2010. This resolution provided major support for the arguments championed by Wilson and others who speak out for greater transparency and fairness in banking practices.
Distribution of Compensation
Under the scheme, HSBC has issued thousands of cheques to customers who declined insurance cover on the protected payment. Most of these payments will be between £25 and £100, providing a recognition by the bank of its previous failings. Others got many times more money. In the examples we heard from people, one woman’s first payment was £25 followed a week or so later by £7,210. It seems quite clear that these larger payments are actually refunds of interest and charges that were unlawfully levied upon them.
The entire compensation scheme has been portrayed as an opening, a chance for HSBC to make good on the mistakes it has made in the past. Its emphasis was on rebuilding trust and making sure customers who suffered bad service get the right compensation. Many of these people have fiercely defended the surprise compensation. Critics, including some Federal Reserve officials, argue the settlements are inadequate given the havoc wrought by the bank’s conduct.