HSBC has agreed with the UK's Financial Conduct Authority to set up a redress scheme for customers who may have suffered by paying an unreasonable debt collection charge imposed by HFC Bank Ltd and John Lewis Financial Services Ltd, both of which are now part of HSBC Bank Plc.

Between 2003 and 2009, any customer of HFC or JLFS who fell into arrears was referred to the firms’ solicitors, who thereupon added 16.4% of the balance to his account as a “debt collection charge.” In 2010 the Office of Fair Trading said that the flat-rate charge was unreasonable as it did not contain the actual and necessary costs of collecting the debt.

In November 2010, the OFT required HFC to stop adding such collection charges until it had varied or introduced new terms in its agreements with customers. The OFT’s review did not cover JLFS but its practices were similar to HFC's. In practice, HFC and JLFS stopped adding a debt collection charge in November 2009 and in 2010, in the FCA's parlance, "reversed the charge from all live accounts."

The FCA announced in December 2015 that it would reconsider its decision not to investigate allegations that someone had made to the Complaints Commissioner about the conduct of HFC. Since that announcement, the FCA has conducted a thorough review of the allegations in respect of HFC and JLFS and says that approximately 6,700 customer accounts, the vast majority belonging to HFC customers, paid the debt collection charge (in full or in part) before 2010 and might be entitled to redress as a consequence.

Those customers will receive redress if they paid more than it cost, or should have cost, HSBC to collect their debts. HSBC has developed a method, of which the FCA approves, for calculating such actual and necessary costs.

In addition, for a small number of customers, the reversal of the debt collection charge in 2010 ensured that their accounts were placed in credit from which, needless to say, they did not benefit. Such customers will now receive rebates containing those credit items.

During its review the FCA also found that HFC had miscalculated the interest payable on various customers' loans. HSBC has identified around 350 accounts that this error affected and has promised to repay the overcharged interest to these customers.

In total, it is estimated that the banking giant will pay approximately £4 million in redress to customers. It will also pay 8% interest per annum and will be contacting all affected customers with offers of redress shortly.