HSBC (LSE: HSBA) (NYSE:HSBC.US), Lloyds (LSE: LLOY) (NYSE: LYG.US) and Royal Bank of Scotland (LSE: RBS) could be facing yet another round of compensation claims from customers, or even hefty fines from the Financial Conduct Authority.
Indeed, it has been found that these banks have been using scare tactics designed to harass customers who have fallen behind on their loan payments into paying up.
Scare tactics 
HSBC, Lloyds and RBS have all been found to be routinely issuing legal demands from what appear to be independent firms of solicitors. But, when checked by an independent body, it was found that these solicitors did not exist.
These ‘pseudo’ solicitors firms have been writing to customers, threatening legal action if the customer in question did not immediately settle their outstanding loan with the bank.
However, some might be surprised to learn that this practice is actually legal because the letters are signed by a lawyer who is individually regulated by the SRA — the Solicitors Regulation Authority.
What’s more, the banks have been disclosing the fact that the solicitor firm is a unit of the bank within the small print of the letters sent out.
It’s unclear how regulators will react to these revelations. The Financial Conduct Authority’s overriding objective is to protect consumers and ensure that consumers trust the financial system. These banks have clearly mislead customers, duping them into believing that their bank has escalated their case to a third-party firm.
RBS has been singled out as it has been found that the bank was sending letters to customers from “Triton Credit Services”. At first glance, Triton appeared to be an independent debt collection agency but those who read the small print, quickly discovered that Triton was in fact a trading name of RBS.
Similar circumstances
These claims come just a few days after Wonga, the UK’s largest payday lender, was forced by the Financial Conduct Authority to pay compensation totalling £2.6m to 45,000 customers for unfair and misleading debt collection practices.
However, Wonga was found to be sending letters to customers from bogus law firms and unregulated individuals. RBS, Lloyds and HSBC have all been using a loophole, which allows the banks to send legal letters, if the letter is signed by an individual registered by the SRA.
Essentially, what this means is that RBS, Lloyds and HSBC have been able to send these letters, without breaking the law by using their own in-house legal departments.
Nevertheless, the Financial Conduct Authority has been keen to make an example of these banks in the past for mistreating customers. So, it is likely that hefty fines and compensation will be sought for these misleading, scare tactics.