Release Date: 23rd May 2024

To access the original FCA document, click here.

Summary

HSBC UK Bank plc, HSBC Bank plc, and Marks and Spencer Financial Services plc (collectively “HSBC”) have been fined £6,280,100 by the Financial Conduct Authority (FCA) for failing to adequately support customers in arrears or experiencing financial difficulties between June 2017 and October 2018. The fine was reduced from £8,971,600 due to HSBC’s early resolution of the matter.

Reasons for the FCA Fine:

• Failure to Show Forbearance: HSBC did not demonstrate adequate forbearance and due consideration to customers who were in financial distress, leading to poor experiences and outcomes for at least 1.5 million customers.
• Inappropriate Payment Arrangements: HSBC entered into payment arrangements without proper affordability assessments, worsening the financial situations of some customers.
• Insufficient Forbearance Measures: The forbearance options provided were often short-term and inadequate for customers facing long-term financial difficulties.
• Automated and Disproportionate Actions: Automated systems issued default notices and final demands even for low arrears balances, adversely affecting customers’ credit records.
• Training and Policy Gaps: Front-line agents were inadequately trained, and there were weaknesses in the policies and procedures governing collections and recoveries.

Key Takeaways for Other Firms:

• Show Adequate Forbearance: Understand and consider customers’ unique circumstances to offer tailored and sustainable forbearance solutions.
• Conduct Affordability Assessments: Ensure payment arrangements are affordable and do not exacerbate customers’ financial difficulties.
• Implement Long-Term Solutions: Provide long-term forbearance options for customers in extended financial distress.
• Avoid Automated Default Actions: Review automated processes to prevent disproportionate actions against customers with low arrears.
• Improve Training and Policies: Strengthen training for front-line staff and ensure consistent application of robust policies and procedures.

Conclusion

The FCA’s penalty against HSBC highlights the critical need for financial institutions to adequately support customers facing financial difficulties. Firms must implement effective systems to ensure fair treatment, appropriate forbearance, and sustainable solutions, thereby avoiding significant penalties and customer detriment.