Not upheld: interest rate differential between representative rate and applied rate complaint against HSBC UK Bank Plc trading as First Direct

Decision detail

Summary

Mr W complained that HSBC applied a personal loan at 8.9% APR instead of the advertised representative rate of 5.7%, despite being a longstanding customer with good credit history. HSBC explained that representative rates are promotional and subject to credit assessment, and that the actual rate depends on individual circumstances. The ombudsman found that HSBC clearly communicated the representative rate was indicative only and could be higher, provided comprehensive loan information, and offered a 14-day cooling off period. The ombudsman concluded HSBC acted fairly in exercising commercial discretion to set the higher rate based on their assessment procedures, and did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman found that HSBC clearly communicated that the representative rate was indicative only and that the actual APR could be higher based on individual circumstances and credit assessment. The information provided was clear, not misleading, and included all relevant details about the loan. HSBC has commercial discretion to set interest rates based on their own risk appetite and assessment procedures. The ombudsman noted that while the representative rate is promotional and subject to FCA rules requiring at least 51% of customers receive it, HSBC was entitled to apply a higher rate to Mr W based on their internal assessment. The customer had adequate opportunity to withdraw within 14 days.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website