HSBC UK Bank Plc · DRN-2648256

The complaint A company, which I’ll refer to as “C”, complains that HSBC UK Bank Plc unfairly declined its requests for a payment holiday and a Coronavirus Business Interruption Loan. Miss H is C’s director and brings the complaint on the company’s behalf. What happened C took out a small business loan with HSBC in January 2019. When experiencing some difficulty in maintaining the monthly payments in early 2020, Miss H approached HSBC with a view to taking a payment holiday. Miss H says that in response to her request, HSBC suggested that she apply for a loan under the government-backed Coronavirus Business Interruption Loan (CBIL) Scheme that had recently been launched. So, with the aim of refinancing C’s business loan, Miss H submitted an application for a loan of £10,500 under the CBIL Scheme on 24 April 2020. But HSBC declined the application a few days later, on the basis that it didn’t allow a CBIL to be used for the refinancing of existing debt. Miss H didn’t think HSBC’s stance was correct. She thought the government had launched the Scheme to help struggling businesses, like hers, and couldn’t see that the rules prevented the refinancing of existing debt. HSBC dealt with the matter as a complaint. While HSBC was looking into things, the government launched an additional loan scheme – the Bounce Back Loan (BBL) Scheme. Loans for £50,000 and under were no longer available under the CBIL Scheme, and instead had to be taken out under the BBL Scheme. HSBC subsequently advised Miss H that a CBIL was no longer available to C and suggested that she apply for a BBL instead. It apologised for any incorrect information she’d been given and paid £200 for any inconvenience this had caused. Miss H remained unhappy and referred the complaint to us. She thought that HSBC had been wrong to decline the CBIL application and that if the bank had handled things properly at the outset, C could’ve obtained a loan prior to the rule changes. She said the BBL Scheme wasn’t helpful for C as loans were capped at a maximum of 25% of the company’s turnover – which meant it wouldn’t be able to borrow what it needed to repay its existing loan. And she said that when following up on the payment holiday request, HSBC had told her that this would be subject to a credit check. She didn’t think that was fair and said she’d not proceeded for fear of an adverse effect on her credit file. One of our investigators reviewed C’s complaint. In summary, she said:  The refinancing of existing debt wasn’t prohibited under the rules of the CBIL Scheme, but lenders had some discretion as to whether they wished to offer this. As HSBC’s internal criteria didn’t allow a CBIL to be used for the refinancing of existing debt held with the bank, she didn’t think it had declined C’s request for a CBIL

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unfairly. And she thought £200 was fair compensation for any inconvenience caused by the conflicting information Miss H had been given about the matter.  HSBC’s payment holiday process – in particular the requirement for a credit check – had understandably discouraged C from accessing the support it needed, which was unfair. So she thought that a payment holiday ought to have been put in place, which would’ve been for a maximum of six months under HSBC’s policy.  The failure to agree a payment holiday hadn’t left C any worse off financially, as it hadn’t made any payments to the loan for eight months and hadn’t incurred any additional costs as a result either. But she thought HSBC should remove any adverse credit information it had reported about the missed payments, and pay C an additional £100 compensation for the inconvenience it had been caused. HSBC accepted our investigator’s recommendation, but Miss H didn’t. She said that there would’ve been no issue if HSBC had processed the CBIL application in April 2020. She thought a 12-month payment holiday ought to be put in place, and that a fairer compensation figure would be £500. So she asked that an ombudsman review the complaint, and it was passed to me to decide. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so, I’ve reached the same conclusions as our investigator and for largely similar reasons. I’ll explain why. The CBIL application While it was possible to use a CBIL to refinance existing debt, lenders had some discretion as to whether they would approve applications for this purpose. HSBC has evidenced that under its policy, it didn’t allow the refinancing of existing debt held with the bank. As that was the sole purpose of C’s application, I don’t think HSBC did anything wrong in declining the request in line with its policy. I understand from what Miss H has told us that she still believes C was eligible for a CBIL and suspects there were ulterior motives for the bank’s decision. But as I’ve said, I can see that the decision was made in line with the bank’s policy – and I’ve seen nothing to suggest that there was any other reason. While C may well have met some (or even all) of the Scheme eligibility requirements, this doesn’t mean that any application it made ought to have been granted. It was eligible to apply – but the decision to lend still rested with HSBC. And as I’ve explained, when considering an application, the bank was entitled to apply its own criteria relating to the use of funds for refinancing. So while I appreciate why Miss H’s disappointment at being unable to obtain a CBIL from HSBC at a time when her business was in need of support, I don’t think the bank handed C’s application unfairly. The position may have been complicated somewhat by HSBC explaining that, in light of the launch of the BBL Scheme, it was no longer able to consider a CBIL application from C as the criteria had changed. While this was correct, I don’t think the change to the CBIL criteria had any bearing on C’s application – as it had already been declined by this time anyway, on the basis that HSBC didn’t allow refinancing of existing bank debt.

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Alongside this, HSBC has accepted that its communication with Miss H about the CBIL wasn’t as clear as it could’ve been. The CBIL application was made at the bank’s suggestion – when really it ought to have known that it wouldn’t approve a request for refinancing, so this was a waste of C’s time. The bank has already apologised and paid £200 compensation for any inconvenience caused to C, which I think is fair in the circumstances. The payment holiday request Prior to the CBIL application, Miss H had asked HSBC for a payment holiday on C’s loan as it was experiencing some financial difficulty and was unable to meet the monthly payments as they fell due. As I’ve noted above, I don’t think it was appropriate for HSBC to redirect Miss H to the CBIL Scheme given that it ought to have known an application to refinance the loan wouldn’t be approved (based on its own criteria). I do, however, recognise that the bank was operating in unprecedented circumstances arising out of the pandemic, including the rapid launch of the two government-backed loan schemes. But in terms of how it dealt with C, I think it should simply have considered the payment holiday request. And in the circumstances – particularly bearing in mind the impact of the pandemic on C – I think it would’ve been fair for the bank to have granted the request. While it’s up to HSBC to decide how it facilitates changes to its products, in this instance I can see how the need to set up a new loan – and in particular, apply a credit check – deterred Miss H from proceeding with her request for a payment holiday. That led to C being impacted unfairly – as it couldn’t access the support it needed. If things had gone as they should have, HSBC could’ve put in place a payment holiday for up to six months on C’s existing loan. That’s its policy on small business loans, like C’s. That seems reasonable to me, and is in line with broader industry practice. I know Miss H thinks a 12-month period would be fair. But I understand that is based on the deferral period of the CBIL, which – for the reasons I’ve explained – isn’t something that C was entitled to. So I think it would be fair for HSBC to put C in the position it would be in if a payment holiday had been agreed in line with its usual policy – so, a maximum of six months. While the complaint has been ongoing, C hasn’t made any payments to the loan. So, albeit informally, C has had the benefit of a payment holiday – a period of time in which it’s not had to make any payments to the loan. I know Miss H is unhappy that interest has continued to accrue on the loan. But that’s how a payment holiday typically works. I’ve not seen that HSBC has applied any additional amounts on top of those that would always have accrued. So I don’t think C has lost out financially. The only difference is that by missing payments without agreement, adverse information will have been reported to credit reference agencies about the loan account. So I think it would be fair for HSBC to remove that, as it’s already agreed to do. And while the non-payment has continued for longer than the six-month period that would most likely have been allowed, in the circumstances I think it would be reasonable for HSBC to remove all adverse information from July 2020 to date. Had the payment holiday been set up when it should’ve been, I think C could’ve avoided a lot of the subsequent contact and correspondence it entered into with the bank. So for the inconvenience caused by the failure to agree the payment holiday initially, I also think it would be fair for HSBC to pay C a further £100 on top of the £200 it’s already paid. I know Miss H also thinks this should be higher, particularly in view of the time it’s taken to resolve the complaint. But I can only award compensation for the impact of any errors made by the bank, and in that respect I think £100 is fair.

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My final decision For the reasons set out above, I uphold this complaint and require HSBC UK Bank Plc to:  Pay C a further £100 compensation on top of the £200 it’s previously paid; and  Arrange for the removal of all adverse credit information recorded since July 2020 in relation to the small business loan. Under the rules of the Financial Ombudsman Service, I’m required to ask C to accept or reject my decision before 10 June 2021. Ben Jennings Ombudsman

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