HSBC has received the biggest ever fine for mis-selling. It must pay a penalty of £10.5 million for selling investment bonds to older customers looking for a way to fund the payment of residential care fees.
So what is the fine for, are you a victim, and how can you claim compensation?
The mis-sellingThe bonds were sold by part of the bank called NHFA (once known as the Nursing Homes Fees Agency). The problem with the bonds was that they were invested in shares or bonds (fixed interest). Because both of these forms of investment involve risk, the advice should have been not to put your money into them unless you have an investment horizon of at least five years. However, the average age of customers was 83 and many were not expected to live this long.
In addition they came with some hefty fees. Investors typically paid 5% up-front and then 1% every year. As a result, the fees plus the annual withdrawals were never made up for by growth in the investment, so the money disappeared far more quickly than if it had just been held in a bank account.
Why were they sold?It's hard to know exactly why these products were sold. The ones that were mis-sold were done so by 30 odd advisers. There's a possibility that they were poorly trained or ill-informed.
Am I a victim?HSBC says 2,500 people are likely victims of the mis-selling, and it will be writing to all of them within the next two weeks. It will also write to all the customers of NHFA to let them know the business is being closed.
If the product was sold to a frail, elderly person they will usually have had a relative with them, that relative will also be contacted. If the product was sold to an elderly person who has since died, they will get in touch with the next of kin. If you haven't heard from HSBC in the next 14 days and think you should, call 0900 917 8072.
CompensationIf you are identified as a victim of mis-selling you will have the relevant charges refunded and will receive compensation if the investment has fallen in value. The average payout is expected to be about £11,000. In addition, the bank will move your cash to a high-interest savings accept or ISA.
This money will take some time to come. The first payments are expected in the new year, but if you are what they are calling a 'complex' case, then you could wait quite some time for a payout.