HSBC froze £1.5bn of customers’ cash in ‘dormant accounts’ – report
23 Oct 2020

HSBC put £1.5bn of its customers’ cash out of reach in frozen accounts, according to an internal report that raises questions over whether the bank heeded its warnings about potential financial harm to its customers.

An internal HSBC UK report seen by the Guardian shows compliance staff tried to warn Britain’s largest bank more than three years ago that it should make a concerted effort to reunite customers with their cash, and was running a “significant reputational risk” by failing to address the issue.

A whistleblower took the internal report to regulators amid concerns that HSBC was not willing to overhaul its policies. The whistleblower is understood to have told the Financial Conduct Authority (FCA) that HSBC seemed far more willing to chase down its debtors than seek out lost account holders. However, the FCA closed the case without taking any public action despite it being part of a year-long investigation in 2019.

The report, produced by members of HSBC’s UK Conduct Risk team two years earlier, said the bank had effectively frozen 1.9m accounts by labelling them “dormant”. It further alleged that HSBC made little effort to track down the rightful owners of the accounts and reunite them with their cash – including those who, the report illustrated, were easily traceable via the electoral roll or a quick online search.

The report also found that HSBC’s dormant account policies were potentially harming customers, including elderly and vulnerable savers, who may have lost track of their money. Around 100,000 dormant accounts, the report said, held deposits worth more than £1,000.

HSBC denied it had mistreated customers, or that it took insufficient action. It told the Guardian it had made “substantial and continuous improvements” to its dormant account policy since 2016.

However, the bank has not implemented some of the key recommendations listed in the report. These included setting up a compensation scheme for customers who may have been inappropriately charged fees or temporarily blocked from accessing their funds, and hiring a credit reference agency and external specialists to conduct a “bulk trace” of customers it had lost touch with.

“Once an account goes dormant, over 50% of customers never regain access to their funds,” the report said.

The “Dormant bank accounts” report also found:

  • HSBC was too quick to make accounts dormant once reactivated. Accounts were allegedly falling back into dormancy within four weeks without regular use – despite HSBC’s formal policies stating that this period should be 90 days.
  • More than half of dormant funds belonged to customers who had active accounts with HSBC, meaning the bank could more easily contact customers to reunite them with their cash. The report said it would cost the bank less than £1 per name to run a “bulk search” of customers whom it had lost touch with.
  • Around a third of dormant accounts belonged to savers aged over 65. Of those, 32,000 were held by people over 80, accounting for around £200m in dormant deposits. “There is clearly a risk that more elderly customers will have lost track of their account, forgotten the details and be suffering detriment from lack of access to their savings,” the report said.

By Kalyeena Makortoff and Juliette Garside, The Guardian, 22 October 2020

Read more at The Guardian

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