Improving Compliance: How to Avoid Costly Financial Pitfalls

FCA fines HBSC £6.2million over treatment of customers in financial difficulty

During June 2017 and October 2018, HSBC did not properly consider, their customers circumstances when they had missed payments. Therefore, inappropriate affordability assessments were being conducted for people to reduce or clear their arrears. Sometimes taking disproportionate action when people fell behind with payments exposing them to greater financial difficulties.

These failings were caused by deficiencies in HBSC’s policies and procedures and training of their staff as well as inadequate measures to identify and address instances of unfair customer treatment.

In 2018 HSBC identified that that there were issues with their handling of customers in financial difficulty and notified the FCA. HSBC invested £94 million in identifying the issues and putting them right. HSBC also issued redress payments totalling £185 million to over 1.5 million customers. The FCA considered HBSC’S remediation and redress programme when setting the fine and settled with a 30% discount to the fine imposed, which otherwise would have been £8,971,600.

The FCA has found that the HBSC breached Principle 3 and Principle 6 of the FCA’s principles for business during this time.

·         Principle 3 - A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

·         Principle 6 - A firm must pay due regard to the interests of its customers and treat them fairly.

There is huge focus on the fast-impending FCA Consumer Duty implementation 31st July 2023. From analysing this case its clear that financial firms need to adopt more stringent ‘fair outcome’ and ‘treating customer fairly’ processes for customers’ and identify vulnerable customers efficiently.  

Some Key Steps:

1.   Review the FCA consumer duty guidelines and identify whether this has or is on the way to being operationally effective for your firm. The new Consumer Duty Principle 12  - A firm must act to deliver good outcomes for retail customers https://www.fca.org.uk/publications/policy-statements/ps22-9-new-consumer-duty  

2.   Highlight areas of greater risk.

3.   Ensure you have effective Compliance experts leading and implementing this framework.

4.   Everything starts from the top! Is this on the board agenda and are the board involved in reviewing and making decisions around these agenda.

Don’t get hit with huge fines! This is our arena, get in touch if you need compliance support!