Students join protest over HSBC rate 'rip-off'

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The Independent Online

Thousands of students have joined groups on the social networking site Facebook, protesting against HSBC's recent decision to start charging interest on the overdrafts of new graduates.

"Stop the great HSBC graduate rip-off" now has more than 2,500 members, while dozens of other groups started for the same reason are quickly accruing members.

The bank set itself on a collision course with Britain's newest graduates last month, when it announced it would no longer be offering any interest-free overdrafts for those who have recently finished university.

Most of HSBC's student customers graduate with hundreds of pounds in interest-free overdrafts, which until this year have remained interest-free for the first few months and years in their new careers. The bank would typically reduce the interest-free overdraft limits by around £500 each year.

However, in a letter to students last month, the bank announced that it would be offering interest-free overdrafts only to graduates who were willing to pay a fee of £10 a month. Otherwise, all overdrafts will be charged interest at 9.99 per cent a month.

The bank now faces losing thousands of student customers who say they feel betrayed by its sudden change in policy. Graduates have been most angered by the bank's suggestion that it has adopted the new policy with a view to teaching them that there is a price to pay for borrowing money.

A spokesman for the bank said most students made only very small inroads into their overdrafts in the first few years after university, and suggested this may be because they had no incentive to pay down their debt. He added that the bank was keen to weed out those who had opened several bank accounts purely to take advantage of all of their interest-free overdrafts.

But students have complained that the bank is hitting them when they are at their most vulnerable - as they are graduating with record amounts of debts and trying to find their first job. Many students are also struggling to find new banks to switch to, as most banks are unwilling to take them into graduate accounts until they have a job lined up.

Last year, HSBC angered customers of its First Direct internet bank by introducing a £10 a month charge for those that did not pay in a minimum of £1,500 a month. The policy hit the bank's least well-off customers, forcing them to move their accounts elsewhere.

Facebook has seen phenomenal growth since it was launched in February 2004 for students of Harvard University. It has more than 34 million active members worldwide and is the seventh most visited site in America.

Customers to receive £3m from Ulster Bank

* Ulster Bank is repaying customers nearly £3m in overcharges on payment protection insurance (PPI). Some 25,000 customers will now receive repayments averaging £115 each, including compound interest.

Overcharges occurred because customers who made early repayment of loans with PPI were not refunded premiums for the period between the actual and scheduled repayment dates.

An Ulster Bank spokeswoman said: "All the necessary steps have been taken to prevent a recurrence of this error and we apologise for any inconvenience caused." The overcharges were incurred in the period up to 2005, and was discovered through an internal review, the bank said. A helpline has been set up to answer customers' questions.

Ulster Bank is part of the Royal Bank of Scotland group, but RBS said that Ulster uses different systems and PPI premiums are automatically refunded upon early loan repayment to both RBS and NatWest customers. An RBS spokeswoman said: "We don't have anything like that with the other brands. It's just Ulster Bank." Ulster operates in both the UK and the Irish Republic, but declined to break down the split of customers affected.

The consumer campaign group Which? responded by warning of widespread failures in the financial services industry in the repayment of PPI premiums where loans were repaid early. Dominic Lindley, a Which? policy officer, said: "Some firms did not refund if you repaid early, but the FSA [Financial Services Authority] has said there must be a system to make repayments. There are questions about how firms calculate fairly a refund. If you have a 60-month loan and cancel after 12 months, then some firms will refund just 60 per cent of premiums." Others, he said, deduct up to £75 as administrative charges from premium refunds.

"It's something we are looking at within a campaign on PPI we are starting later this year, along with the mis-selling of PPI," added Mr Lindley. "PPI is a bad product, that is overly expensive and is sold to some people who can't claim on it. Anyone unhappy with their refund terms should complain to the firm and if they are still unhappy complain to the Ombudsman."

The FSA declined to comment.

Paul Gosling