HSBC Holdings Plc will pay around £4 million in compensation to thousands of customers who were overcharged for debt collection after falling behind on repayments.
Payouts will include 8% interest per annum.
An investigation by the U.K. Financial Conduct Authority found that around 6,700 customers of HFC Bank Ltd. and John Lewis Financial Services, which are now part of HSBC, paid a debt collection charge that was in excess of the actual and necessary cost of recouping what they owed. Between 2003 and 2009, borrowers who fell into arrears were referred to solicitors who added 16.4% of the balance as a "debt collection charge," which the Office of Fair Trading identified as unreasonable in 2010.
Customers will receive redress where they paid more than the actual and necessary cost of collecting their debt, the FCA added.
The watchdog also found that HFC had miscalculated the interest for loans relating to about 350 customer accounts.
The FCA's action came as a result of a 13-year battle by Nicholas Wilson against HSBC and the U.K.'s chief financial watchdog, the lawyer told The Guardian. The FCA had opted to not investigate the allegations but reconsidered in December 2015 after a complaint by Wilson to the Office of the Complaints Commissioner, which The Guardian noted had described the regulator's handling of the case as "negligent" and "defensive."