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Exclusive: HSBCs Indian compensation battle

Credit cards handed out under the pretense they are free when they arent, bank accounts emptied without warning, customers listed as known defaulters without being told, alleged incompetency, failure to deal with complaints efficiently if at all. These are just a taster of the sorts of complaints Citywire Money has heard in recent months about HSBC India, the bank's third largest business in Asia Pacific. With the global bank (HSBA.L) focusing on emerging markets as it attempts to boost shareholder returns, we thought we would take a closer look.

Sanjeev Kumars story

Sanjeev Kumar opened a current account and savings account with HSBC in June 2009 when he started a new job as a senior manager. A couple of months later HSBC informed him that he owed 27,000 rupees (366) on a credit card. Despite telling HSBC that he had never received a credit card, the bank proceeded to empty his entire savings account of Rs 39,000 (528) without warning returning just Rs 12,000 a week later once Kumar had contacted his solicitor. It was not until Michael Mason-Mahon, an HSBC shareholder who has represented HSBC customers in 13 cases in India and advised many others, stepped in to help however that the bank agreed to repay the remaining Rs 27,000 this year after it was unable to prove Kumar ever received the credit card in question. Kumar said he regularly spent half an hour on the phone just being passed around from person to person. In the end, he said, his calls and letters were just ignored, leaving him feeling totally helpless. HSBC told Kumar the extra Rs 12,000 was taken from his account as a result of an operational error. And though HSBC eventually repaid all the money it took, the bank said this was merely a service gesture and should not be construed as admission of any liability/responsibility on their part. HSBC refused to pay any additional compensation for the distress or inconvenience caused to Kumar.

Abhishek Jains story

Jain applied for a credit card with HSBC in 2006 but said he never received it. A couple of years later however he discovered HSBC had put his name on Cibil Indias equivalent of a credit reference agency as a known defaulter without informing him. When he contacted HSBC he was told he had an outstanding balance of Rs 85,000 and after protesting to his local bank branch that he had not received the card he was informed that he did get the card and must repay the debt. Jain then proceeded to call, send emails and letters to HSBC but heard nothing back and was eventually forced to contact the ombudsman for help. As HSBC was unable to provide proof Jain had ever received the card the bank eventually agreed to clear Jains name with Cibil and wrote off the amount supposedly owed. The whole process however took three or four months. It was a painful time for me, Jain said.

Sriram Govindans story

Sriram Govindan said he cleared and cancelled his credit card with HSBC in 2008. When he applied for a car loan this year however CIBIL records indicated he owed HSBC an outstanding payment of Rs 91,500. Armed with bank statements proving he has repaid the balance, Govindan is now petitioning HSBC to write off the debt and clear his name. Govindan, a senior manager, said had his company performed a credit check he could have lost his job, causing him even more shame.

Confidentiality agreements
These are just three examples of the sort of treatment customers claim to have experienced at the hands of HSBC India. There are many, many more the vast majority of which appear to be from credit card customers. Citywire has the details of at least ten other similar cases several from customers claiming they were sold a credit card having been told it was free when it fact turned out to have expensive charges. However, we are unable to speak to all of the people concerned directly or publish their stories as HSBC insisted they sign confidentiality agreements upon settlement which was only achieved after MasonMahon stepped in to help. When Citywire asked HSBC if it would release the customers from their confidentiality agreements so that we could speak to them, the bank refused to acknowledge the request.

Compensation
HSBC appears to have paid out a total of at least Rs 855,000 (11,588) in compensation to just seven customers not including the amount the bank has written off in alleged charges. In one case a customer was paid Rs 320,000 (4,336) the equivalent of about three times their annual salary. HSBC has also had to clear at least ten customers names with Cibil.

HSBCs response
At HSBCs AGM in May Mason-Mahon (pictured) asked the companys chairman Douglas Flint if HSBC shareholders should be concerned about how the bank is treating customers in India.

Ask our customers in India, Mr Chairman, about HSBCs reputation, integrity and what HSBC has done and is doing to them? MasonMahon said. HSBC India received 452,130 registered complaints between 2006 and 2010. Flint pointed out however that the majority of these complaints were received in 2007 and numbers have come down dramatically in recent years from 149,351 between April 2006 and March 2007 to 58,851 between 2009 and 2010. Between March 2010 and 2011 meanwhile this total dropped even further to 35,347. To put this in context, in 2010 HSBC UK received 123,628 banking complaints but while it has 15 million retail customers HSBC India has just 1.8 million retail and commercial customers combined. Flint blames the high complaint figures in 2006 and 2007 on the explosion of credit cards across the industry and claims the bank has spent a lot of time and money cleaning up the mess. The chairman also told shareholders that many of the complaints were about a statement or a card not being delivered and administrative mistakes irritations rather than more fundamental problems. We do not recognise your (Mason-Mahons) characterisation of this as a systemic problem. We certainly do not recognise any characterisation of dishonesty, Flint added. In response to some very specific questions from Citywire meanwhile a spokesperson for HSBC India said: With reference to your queries regarding customer service, it is our endeavour to provide the best possible services to all our customers. If however, any customer is not satisfied with the services provided them, we have a robust grievance redressal mechanism as per local regulatory norms, HSBC added. And when asked about the specific cases mentioned above, HSBC said: 'It is customary business practice for us to address any issues customers may have with the Bank's products or services, directly with them'.

HSBC is growing

HBSC operates in 87 countries and has over 220,000 shareholders. In the first half of this year HSBCs pre-tax profits rose by 3% to $11.5 billion compared to the same period last year $451 million (roughly 4%) of which was made in India, up from $340 million compared to the first half of 2010. But as the banking giant continues to expand across the world, it begs the question how tight a grip does HSBC really have on the day to day goings on in its subsidiaries' branches? With the recent PPI mis-selling scandal in the UK which could end up costing the banks over 5 billion still fresh in peoples minds, one cant help but look at HSBC India and wonder.