The regulator said that between June 2017 and October 2018, HSBC failed to properly consider people’s circumstances when they had missed payments.

This meant it did not always do the right affordability assessments when entering arrangements with people to reduce or clear their arrears.

Sometimes it took disproportionate action when people fell behind with payments, which risked people getting into greater financial difficulty, the FCA said.

The failings were caused by deficiencies in HSBC’s policies and procedures and the training of their staff, as well as inadequate measures to identify and address unfair customer treatment.

In 2018, HSBC identified that there were issues with their handling of customers in financial difficulty and notified the FCA.

Following its notification to the regulator, HSBC invested £94m in identifying the issues and putting them right.

HSBC also issued redress payments totalling £185m to over 1.5m customers. 

Therese Chambers, joint executive director of enforcement and market oversight said:  “People must be able to trust their lenders to treat them fairly when in financial difficulty. By failing to do so, HSBC put 1.5 million people at risk of greater financial harm. 

“It deserves credit for identifying the issue and putting it right. The cost it has incurred in doing so, however, should be a warning to all lenders that they need to understand their customers’ circumstances so as not to make a bad situation worse.”

The FCA took HSBC’s remediation and redress programme into account when setting its fine, and as the bank also agreed to settle the case and qualified for a 30% discount to the financial penalty imposed.

The most recent FCA Financial Lives study found that 7.4m people were struggling to pay bills and credit repayments in January, down from 10.9m in January 2023.

However, despite the improving picture the number is still higher than the 5.8m recorded in February 2020, before the cost-of-living crisis began.

Some 5.5m people said they had fallen behind or missed paying one or more domestic bills or credit commitments in the previous six months from January, down from 6.6m people a year earlier.

Meanwhile, in the 12 months to January, 2.7m adults sought help from a lender, a debt adviser or other financial support charity because they found themselves in financial difficulty.