| HSBC expects to pay back £300m in overdraft charges |
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| Tuesday, 04 March 2008 | |
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HSBC has become the first bank to put a figure on the amount of money it expects to have to return to customers after the current bank charges test case.
The bank announced its interim results for 2007 on Monday. The Annual Report contains an estimate of £300m for future refund claims in respect of overdraft charges. This amount is in addition to the £115m HSBC already returned to account holders before the High Court froze all claims pending its decision. The banks, however, remain free to apply overdraft charges during the proceedings. Legal status and enforceability On 27 July 2007, the Office of Fair Trading (OFT) issued High Court legal proceedings against a number of UK financial institutions, including HSBC Bank plc, to determine the legal status and enforceability of some of the charges applied to their personal customers in relation to unauthorised overdrafts. A number of preliminary issues in these proceedings were heard in a trial in the Commercial Division of the High Court on 17 January 2008. This trial concluded on 8 February 2008 and judgment, on the preliminary issues tested, is expected within the next few weeks. HSBC said that the proceedings remained at a very early stage and may, if appeals on the preliminary issues - or, subsequently, on substantive issues - are pursued, take a number of years to conclude. “A wide range of outcomes is possible, depending, initially, upon whether the Court finds that some, all, or none of the charges should be tested for fairness and/or tested as common law penalties and, if it does find that some or all of the charges should be so tested, upon the Court’s subsequent assessment of each charge across the period under review,” the bank noted. Large number of possible outcomes Since July 2001, there have been a variety of charges applied by HSBC Bank plc across different charging periods under the then current contractual arrangements. “HSBC Bank plc considers the charges to be and to have been valid and enforceable, and intends strongly to defend its position,” according to the annual report. The bank said it currently expects to win the test case, but added that even if the Court decided in the OFT’s favour there were a large number of possible outcomes, each of which would have a different financial impact. Based on the facts currently available to it, and a number of assumptions, HSBC Bank plc estimates that the financial impact could be approximately US$600 million (£300m). HSBC explained that it was extremely difficult to make an estimate of the potential financial impact at this stage, owing to - among other things – the complexity of the issues, the number of permutations of possible outcomes, and the early stage of the proceedings. “In addition, the assumptions made by HSBC Bank plc may prove to be incorrect,” the report concluded. Related articles
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