HSBC UK Bank Plc · DRN-3175761

The complaint A company, which I’ll refer to as “S”, complains that HSBC UK Bank Plc declined its request for a loan under the Coronavirus Business Interruption Loan Scheme. Mr D is S’s director and brings the complaint on the company’s behalf. What happened S applied to HSBC for a loan of £50,001 under the Coronavirus Business Interruption Loan (“CBIL”) Scheme in April 2020. With no response to the application, Mr D chased the bank on a number of occasions over the months that followed. That eventually led to a complaint being raised. HSBC responded to the complaint on 23 July. It apologised for the service S had received, but said that the high level of demand for borrowing under the Scheme had caused some delays. HSBC asked Mr D to reapply in September as it was unable to locate the original application he’d submitted. It reviewed the application that month and wrote to him on 21 September to say that it was declined. This was on the grounds that the turnover going through the company’s account wasn’t sufficient to support the loan amount requested. Mr D raised a further complaint. He said HSBC had led him to believe that the initial application had been successful – as in its correspondence of 23 July, it had referred to the application as having been approved. He said he’d committed to a contract on that basis. While HSBC accepted that it incorrectly referred to the “approval” of the application when it meant to say “submission”, it thought the rest of its response had been clear that further information was needed before it could progress the application. It reiterated that S’s CBIL application had been declined due to unaffordability. Mr D remained unhappy and referred the complaint to us. One of our investigators looked into things and thought it should be upheld in part. She didn’t think HSBC had made an error in declining S’s CBIL application for the reason it gave, noting that there was a requirement that the loan amount be no more than 25% of the applicant’s turnover which S hadn’t met here. But she thought that S had been put to some inconvenience by delays on the bank’s part in confirming its decision. So she recommended that HSBC pay S compensation of £250. HSBC accepted our investigator’s view, but Mr D didn’t. He still thought the first application had been approved and so didn’t think it was fair for the bank to have then used the second application as a means to decline it retrospectively. He didn’t agree that loans under the CBIL Scheme were limited to 25% of the applicant’s turnover. And he didn’t think that the £250 compensation was sufficient, given the nature of HSBC’s errors and the impact they’d had on S.

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So with no resolution, the complaint was passed to me to decide. My provisional decision I wrote to both parties with my provisional decision earlier this month, setting out why I also thought S’s complaint should be upheld in part. While my initial conclusions were the same as those of our investigator, my reasons were slightly different. So I gave S and HSBC the opportunity to respond with any additional comments or evidence they wanted me to take into account before I made a final decision. With regard to the CBIL application, I said I didn’t think HSBC had done anything wrong. In summary, this was because:  While recognising there were reasons why Mr D considered S’s first application to have been approved, I didn’t think it had been. The bank had required a second application as it hadn’t been able to locate the first.  The second application was properly assessed. Under the rules of the CBIL Scheme, lenders were entitled – and expected – to assess the viability of the lending proposition. HSBC wasn’t happy to lend on the basis that S’s turnover wasn’t sufficient to demonstrate that it could afford the loan repayments. That was a decision it was entitled to make and I’d not seen anything to suggest it was unreasonable.  It was a requirement under the rules of the CBIL Scheme that the amount borrowed did not exceed 25% of the applicant’s turnover. Mr D had understandably disputed this as he’d not been made aware of it during the process. But it was one aspect of the qualifying criteria – which required that the amount borrowed was no more than: o Double the applicant’s 2019 wage bill; o 25% of the applicant’s 2019 turnover; or o The applicant’s liquidity needs for the next 18 months (for small or medium- sized enterprises, like S).  Lenders had some discretion under the rules of the Scheme to choose which of these parameters it wished to apply. So HSBC was within its rights to decline S’s application on the basis that in asking to borrow £50,001, it had requested more than 25% of its annual turnover (which I’d understood was around £20,000). Although in any case, it seemed to me that the bank hadn’t needed to apply these limits as it was unwilling to approve the application given its affordability concerns, irrespective of the maximum limits that could be lent. While I thought HSBC’s decision to decline the CBIL application was reasonable, I thought there were shortcomings in the service it had provided S. On this, I said:  S first applied for the CBIL in late April and had only received its answer around five months later. During that time, Mr D had received little by way of meaningful update and had chased things up on a number of occasions. The bank had been unable to locate the first application so a second application was required, putting S to further unnecessary trouble.  It was right that S be compensated for the impact of the bank’s delays. I couldn’t see that they’d caused S any financial losses, as ultimately the company hadn’t been entitled to the CBIL. But it had been engaged in additional contact and

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correspondence, including the second application – all of which had been avoidable. For this, I thought that £250 was fair compensation.  Mr D said he’d acted in reliance on HSBC’s assurances that the first application had been approved, but I didn’t think it was reasonable to think that the loan had been approved. There was only one passing reference to the CBIL having been approved in one of HSBC’s letters – and that same letter had gone on to explain that further information was needed (at this point, simply to locate the request) and that the bank could then “progress your application”. And S hadn’t had any other confirmation from HSBC that the loan had been approved – most notably, it hadn’t received an offer letter or entered into any agreement. So I didn’t think HSBC was responsible for any losses that S may have incurred in acting on the belief that the loan funds would be available. Both parties confirmed receipt of my provisional decision but neither provided any further information. 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, and with neither party having provided any further information for me to take into account, I’ve not reached a different conclusion from that set out in my provisional decision. So this decision confirms my provisional findings, as set out above. My final decision I uphold this complaint in part and require HSBC UK Bank Plc to pay S compensation of £250. Under the rules of the Financial Ombudsman Service, I’m required to ask S to accept or reject my decision before 21 December 2021. Ben Jennings Ombudsman

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