HSBC Could Take a Hit

The HSBC bank has been involved in a court case regarding fair and legal means of fees regarding their credit cards as have a few other banks. HSBC announced yesterday that they could be taking a hit for 600 million dollars US if the court case is ruled against the banks. These billions of refunds would be going to the consumers straight from the banks holdings. There was a test case earlier in the year regarding the UK bank charges that have been seen as unfair. If you are not familiar with the legal case it truly started last month as a result of the Financial Services Authority looking into how the banks where applying the fees to consumer accounts.

Part of the case is talking about the increase in overdraft fees that have been affecting a great deal of consumers, and the banks have seen these as fair. So the court case began as a test to see where it may head as the High Court was the first to see it. The High Court believes that the case will be a long legal battle. HSBC is the only bank at the moment to look at the full potential of the outcome. They have done a study to look at the facts that are currently being brought into question. They are making a few assumptions regarding the outcome, but they still believe the deficit of the court case will yield about 600 million in USD.

The result would mean a refund on top of the 115 million pounds or 228 million dollars US. The first refund was made at the end of last year as a result of issues regarding fees. The refunds began as a result of the first look at the fees, but were suspended as the court decision was asked for.

Joe Garner is one of the HSBC personal in the general manager position that has been privy to the estimates. The estimates have actually come from the auditors and there have been a range of numbers produced in the last few months. The number of outcomes of the case has been a partial reason for the many estimates made. The court case is going to look at the range of fees any of the banks are currently charging, especially the overdraft fees. If they find any of the charges that have been applied are unauthorised as the consumers claim they have been the refund and decision will not be in favour of the banks. The charges have been between 24 and 39 pounds for the overdrafts and are believed to be unfair under the consumer contract regulation according to the Office of Fair Trading.

The banks have already paid out more than 400 million pounds in refunds. These refunds were given in the first part of 2007, but the real problem is that the charges seem to be unclear to the consumers and to the Office of Fair Trading so the court is now involved.

Financial News March 2008
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