HSBC spent almost 1 million pounds a day in the first six months of the year to refund bank charges, raising the prospect UK banks could face a combined first half bill of over 800 million pounds ($1.6 billion).
Britain's banks have faced a consumer backlash this year over the charges they levy when consumers slip into the red without prior agreement. Thousands of Britons have complained over what they say are unfair charges and have claimed back years' worth of fees.
HSBC, the first UK lender to report the cost of refunding thousands of customers, said on Monday it took a charge of almost 120 million pounds ($243 million) for the first six months of 2007 - nearly 1 million per working day. Analysts had estimated refunds would top 200 million pounds ($407 million) in the first half for the whole industry.
HSBC is Europe's biggest bank in market value terms but it is only the fifth largest UK bank in account terms, with 14 percent of the current or checking account market, indicating the industry could suffer a bill of four times the current estimate.
HSBC said its charge may not be representative of the industry as a whole, as its fees were lower than most rivals and complaints and refunds procedures would differ. "It was ridiculous that in a core banking activity there was uncertainty about legal clarity," HSBC Chairman Stephen Green said at a press conference.
Analysts have said the dispute over overdraft charges is likely to lead to bank penalty fees come under pressure, but could take British lenders closer to charging for current accounts and other services as standard - not currently common practice.
Tens of thousands of customers have claimed back up to six years worth of penalty fees in recent months, spurred on by consumer campaigns, high-profile media coverage, template letters provided on Internet sites and anecdotal evidence that banks have been repaying charges. Rival lenders have so far acknowledged the issue but have stopped short of detailing the cost of refunds. HSBC said its personal financial services business in Britain represents less than 7 percent of world-wide profits.
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