Household HSBC Watch

Tue Mar 29, 2005 5:31 pm      

Due to an overwhelming number of reports from people stating “The first statement we received from HSBC Retail Services had late fees charged”, we offer the following theory:

In the world of retail sales, a sale may hinge on immediate credit. Often a merchant will offer special sales prices or interest free financing when purchases are charged to a private label account. When the customer does not have an account and relies on an in store credit application there may be problems fitting the new account and purchase into the creditor’s billing cycle.

The estimated response time for account data is 2 to 4 weeks. For the consumer purchasing with a new account, this means that the data to set up the new account, assign an account number, input the information may be delayed. This provides a window in the statement/billing cycle that compares with “Catch 22”. The account was not created until after the cut off for a billing cycle, thus a statement was not generated. However the account contains information regarding a purchase made before the billing cycle. The account was created days or weeks after the purchase, but because of the interest free promotion, the date of the purchase is driving the data entry.

Computers are logical and stupid. You can’t have a charge without an account. The account is created based on the purchase date. If the account is created after the billing cycle has passed, but created using an earlier date (the date of purchase), then the first billing cycle that a statement can be printed is recognized as the second billing cycle by the computers. The computer program will recognize the account as previously existing (because of the date), charge a past due fee because no payment was made during that cycle. The catch is that “no statement was mailed to the customer prior to the late fee being charged”.

From that point on it gets progressively worse for the customer. Any late payment defaults the agreement. The interest free promotion is void, interest will accrue, and a late fee of at least $29 is charged. The customer must try to get the late fee removed and the interest free promotion reinstated. All too often, the customer service representatives are uncooperative and do not understand what caused the confusion. To CSR’s it is the customer’s fault and the burden of proof is on the customer. However the customer did not get a statement prior to the one with a late charge, did not know their account number, HSBC’s payment address, or the due date until they received their first statement. You know the one. It’s the one with a late fee, accrued interest, and default interest rates charged.

The above scenario may also be significant when an account is transferred from one account service provider to another. We have reports from consumers stating they received notification from GECF that GECF would no longer be handling their account and to stop making payments to GECF. However no statements were received from the new account servicer (HSBC Retail Services) for weeks or months. By the time the consumers received their statements or information from HSBC Retail Services regarding the new account number with HSBC, mailing address, and telephone numbers for customer service, the accounts were shown as delinquent with fees, at a default interest rate, and warnings of repossession.

While most markets strive for “seamless” integration of new and transferred accounts, all too often it is the customer that comes unraveled. When information is distorted due to delayed billing, the circular logic results in a “Catch 22” for the consumer and merchant. Other credit card accounts may be adversely effected if the account is reported late to credit reporting agencies. Merchants’ sales are reduced because customers do not trust the accounting process. HSBC Retail Services may gain hundreds of dollars for each account that is effected by this scenario.

1. http://www.kanbay.com/docs/case_studies/IBM%20Household%20International.PDF IBM Customer Reference

Note: this text is presented as a theory only.