Market - - Jan 23,2017
HSBC has agreed to pay 4 million pounds ($5 million) as compensation to thousands of its customers who were overcharged for goods brought on credit.
The amount will be distributed among 6,700 customers who were charged unreasonably between 2003 and 2009. The credit was provided by two firms at that time, namely HFC and John Lewis Financial Services, which are now both owned by HSBC.
The Financial Conduct Authority (FCA) announced that HSBC has now voluntarily agreed to pay the amount. This announcement represents the victory of 59-year-old Nicholas Wilson, who has devoted thirteen years for pursuing this issue.
Wilson told that in 2003 itself he had warned HSC that whatever they are doing was illegal. He added that he has subsequently lost everything- he is unemployed now and last month he was also facing repossession proceedings.
When these customers fell short of payments, they were charged at 16.4 percent of their outstanding balances as a debt collection fee. The Office of Fair Trading (OFT) resolved that such a charge was unreasonable back in 2010.
However, as per FCA calculations, on average, each customer will receive about £600. The affected customers will be contacted directly by HSBC.
The FCA also found out that HFC had miscalculated the payable interest on loans for over 350 customers. HBSC has affirmed to repay the overcharged interest, along with an interest of 8 percent per annum.
Consumer credit in the UK has faced criticism since the FCA took charge of the sector in 2014. A number of companies have been fined by the watchdog since then.
The FCA has also forced controls over short-term consumer lending in an attempt to avoid irresponsible lending and a mounting a huge amount of debt in the UK. The watchdog has imposed a series of regulations, including a cap on the cost of short-term loans, which it forecast would eradicate a number of payday lenders.