HSBC UK Bank Plc · DRN-5825977

The complaint A limited company, which I’ll refer to as R, complains that HSBC UK Bank Plc acted unfairly in relation to the funds from R’s bounce back loan (“BBL”). In particular, HSBC has recorded the loan as in default, which has had an impact on R’s ongoing trading. What happened In June 2020, R successfully applied for a BBL for £37,500 and the funds were paid into its current account. In January 2021, HSBC closed R’s accounts and sent R a cheque for roughly £44,000. This included the BBL proceeds. R says it was unable to open a new current account for some time, due to the pandemic. It wasn’t until June 2022 that R attempted to pay in HSBC’s cheque. HSBC returned the cheque unpaid, as it was over six months old. When R queried this, HSBC incorrectly said that the cheque had already been cashed and declined to issue a replacement. In mid-2022, HSBC declared R’s BBL in default as no repayments had been made. The bank recorded this default with credit reference agencies. In January 2023, R complained about the missing funds. HSBC apologised for the previous incorrect information and offered to pay interest on the balance. But they didn’t issue a new cheque. In 2024, R asked the Financial Ombudsman to look into its complaint. Whilst we were looking into things, in February 2025, HSBC sent R a new cheque for £44,000. But the bank still thought it was fair to record the BBL as in default. One of our investigators looked into what had happened and concluded that HSBC should reasonably have used their right of set-off to repay the BBL rather than follow their default and recovery process. He thought the bank should therefore remove the negative data on R’s credit file. HSBC disagreed and asked for an ombudsman’s decision. They said that between January 2021 and June 2022, R had had the BBL funds in the form of the original cheque. R had every opportunity to use that cheque to repay the BBL and had it done so, would have avoided the default. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint.

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Having done so, I’ve reached the same conclusion as our investigator, for essentially the same reasons. Given the circumstances here, I don’t think it’s reasonable for HSBC to treat the BBL as in default. I think it’s clear that both sides have made some errors here. R was responsible for the delay in paying in the cheque between January 2021 and June 2022. HSBC argues that because of this period, during which R had the cheque but chose not to use it, they were right to follow their usual recovery processes. I am not persuaded by this argument. I acknowledge that R was briefly in possession of the BBL funds in 2020, in that the money was in R’s bank account until HSBC chose to close it. However, by the time repayments were due to start in July 2021, HSBC was in possession of the funds, not R. I don’t think it’s reasonable of the bank to argue that because it had issued a cheque, R had the money. R may have been in possession of an uncashed cheque for some time, but it is clear that the actual money remained in HSBC’s account throughout. R did not have the benefit of these funds. The bank has characterised the cheque and the BBL recoveries process as two separate journeys, but I do not think this is fair in these circumstances. R may have signed a loan agreement, but HSBC cannot reasonably argue that R should have been repaying a loan since 2021 when HSBC have themselves had the money all the time. It seems to me that what should have happened here is that HSBC should have realised that they still had the funds and cancelled the loan agreement, or else used the funds they held to repay it. In either case, it wouldn’t in my view be fair to regard R as having failed to fulfil its obligations. These are unusual circumstances, but I consider that HSBC has had the power to put things right over a prolonged period, but instead complicated the matter. I don’t think it’s fair for R to be left with a default on its credit record as a result. Putting things right I can’t know what would have been the outcome here if HSBC had realised what had happened and located the funds in 2021. But I think the fairest approach is to put R into the position it would have been in if HSBC had found the funds and used them to repay the BBL. HSBC sent R a new cheque in 2025, which I understand R has cashed. My proposed compensation is therefore based upon R returning the BBL funds before the bank removes the default marker. That said, the bank should pay compensatory interest in any case. Subject to R returning the £37,500 BBL proceeds, HSBC should: • Remove the default and any other adverse credit information relating to the BBL from R’s credit record. • If HSBC has loaded any CIFAS markers in relation to this BBL, these should also be removed. I understand that HSBC also paid to R in 2025 the other funds held in R’s accounts at the time of the account closure, amounting to around £6,800. If they have not already done so, HSBC should pay interest on this non-BBL balance at a rate of 8% simple per year from the date on which the original cheque was presented in June 2022 until the date when the replacement cheque was cashed in 2025. This is in line with the bank’s previous offer and represents compensation for R being deprived of these funds between those dates.

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My final decision For the reasons set out above, I uphold this complaint and direct HSBC UK Bank Plc to put things right as I’ve described. Under the rules of the Financial Ombudsman Service, I’m required to ask R to accept or reject my decision before 23 October 2025. Louise Bardell Ombudsman

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