HSBC deserves to have its banking charter revoked, plain and simple.
While America was in a turkey stuffing-induced slumber, HSBC proved through its treatment of Brett King, arguably one of the world’s most forceful proponents for banking innovation, that it does not understand what it means to behave in a responsible fashion. And that means it does not deserve its banking charter.
To recap, King was on his way to his New York home from the airport on Friday morning when he tried to use his HSBC Debit Card, which is linked to his business account. The card was rejected. Thinking it was some sort of fraud stop, he called HSBC, whereupon he was told that his business account was closed. That that business account is presumably attached to King’s banking startup, Moven, or to his consulting business, which aims to help banks become better at banking, makes the episode all the more ironic.
From here, King’s story gets, as someone said on Twitter, Kafka-esque. King says HSBC never notified him that the account would be closed. You may recall that HSBC essentially decided last September to “fire” a large swath of its small business customers, by closing their accounts. King’s account apparently made the cut. Now, HSBC says it sent King a snail-mail letter that it was closing his account — to an address King had changed with the bank a year before. HSBC also sent the funds from the liquidated account to that old address.
When King raised a hackle, because he knows how big banks work — since many of them are his clients, after all — he got nowhere. A call center in Calcutta, India, effectively stymied him. To make matters worse, he tweaked his experience, in real time, to @HSBCUSA, @HSBC_Press, @HSBC_UK_Help and other HSBC-labelled Twitter accounts, but got a response. Here is how it ended for King:
In the end the supervisor called me back about two hours later (that was very high priority, I was assured). The Senior Floor Supervisor was named Nihlanjo, still based in [Calcutta]. Nihlanjo offered the following solution:
- Go into a branch and change your address (again);
- We’ll then be able to send you notification of your closed account;
- We’ll be able to cancel the check we’ve already sent you; and
- Once that is confirmed we’ll send you another check with your funds.
This was the “solution” at 6 pm ET on Friday.
HSBC — and any bank that behaves like this — should have its banking charter revoked. A banking charter is essentially an oligopolistic charter. As King himself knows from his Moven startup, acquiring a banking charter is as difficult as getting elected to the US Senate — only a few make it. With the charter’s great power — as Uncle Ben said to Spiderman — comes great responsibility, and HSBC has shirked that responsibility. Let’s start with the decision to fire its small business customers. I will let King tell you the story:
I asked [the HSBC CSR] what was the reason the account was closed — had I done something to trip the fraud or risk guidelines? Lhakpa read from a prepared script (I know this because I asked her if she was reading it and she said yes, she had to; she wasn’t allowed to put it in her own words) and she explained that due to “a strategic review, HSBC had determined that there were many small business accounts closed due to not being international or multi-national in scope, with too small a balance or not enough transactions.”
Is this how an organization that cares about people behaves? It is clear that HSBC made no accommodation to each of those “small business accounts” to help them find other banks. Without that help, HSBC was heaping a mess of work on each of those small businesses to scurry and find a new bank within a couple of months. HSBC does not deserve a banking charter if it cannot treat its customers — even those it is “firing” with consideration.
Further, even if HSBC aimed to behave in a proper manner, it is evident through King’s experience that it has not invested enough to do so. King gave HSBC every opportunity to quickly make things right. The bank not only did not, but obviously could not. King is logging on to his HSBC online and mobile banking portals regularly. He tweaked to every known HSBC Twitter account. He even guided the CSR on how to properly deal with his query. Nothing. It is now Monday at 9:15 am ET and King told Bank Innovation that he got a call from someone at HSBC on Saturday, yet the matter remains unresolved. If a bank of HSBC’s size does not invest enough into the capabilities to resolve customer problems expeditiously, it does not deserve a banking charter.
Finally, do not for a moment think this is an isolated episode. Last April, we did an analysis of consumer complaints to the Consumer Financial Protection Bureau to determine which of the Top 20 US banks by assets piss off their customers most. Guess which bank was No. 1 in this category? That’s right, HSBC. HSBC receive 107.97 complaints per million accounts. By comparison, Ally Bank registered 7.21 complaints per million accounts. Forget CAMELS rating — if a bank cannot do good by its customers, it should not have a banking charter.
Remember, this is the same HSBC that was fined for its role in the Libor-rigging scandal and for money laundering for al Qaeda. Yes, that al Qaeda. The only way to get the attention of a bank that was holding more than $1 trillion of risk-weighted assets at the end of last year is to revoke its banking charter. Fines of $1 billion here or $1 billion there are not going to do it. Because it is essentially granted an oligopolistic market power, banks can be expected to adhere to a higher standard. HSBC isn’t even close to that — and, in the end, that is the main reason why regulators should revoke its banking charter now.
Read King’s latest account of the HSBC episode here.
JJ,
Thanks for this, and I hear you. Although revoking their charter won’t necessarily help all those small businesses that have or had an account with HSBC 🙂
BK
That is true, Brett, but when you are Too Big to Care, what other option is there?
HSBC Talks small acts big
Community Banks talk big act small
There are choices
It’s quite odd, BK. If the address was changed a year ago, there wasn’t any statement or e-statement you’ve received/checked for over a year? This is your business account so I assume it’s an account your admin will monitor closely.
Anyway, fully empathize your situation especially this happened over the thanksgiving weekend.
Closing of an account is an unfortunate situation that many non-profitable retail and business customers may face, especially in the coming years. As was once stated by the head of Bank of America, Brian Moynihan, “We have a right to make a profit”.
What had made this case more unfortunate is that there was certainly a disconnect in communication of the same. Of course, I think we all hope that lines of communication from their financial institutions will be more transparent moving forward for all customers.
However, the overly-extreme idea and headline of revoking a bank’s charter just seems a little drastic, no? I would think that would cause just a few more global problems than what you hope it could resolve.
If this particular situation didn’t happen to BK but rather a small independent shop owner in the midwest would JJ still have the same reaction?
Matt, thank you so much for your comment. It is greatly appreciated.
Would I have had the same reaction? Absolutely! This has nothing to do with King, other than the fact that because he understands banking, he could navigate HSBC’s red tape better than the average customer. But, believe me, I would feel exactly the same should this had been some random customer.
I take issue with Moynihan’s comment. Does Bank of America (or HSBC) “have a right to make a profit”? Yes. But I maintain that Bank of America and HSBC have an additional obligation that goes beyond that faced by any other industry save medicine: that is, to make a profit AND behave like proper societal citizens. Why? Yesterday, the Federal Deposit Insurance Corp. revealed that the number of banks in nation has dropped to 6,891, its lowest level since “at least” the Great Depression. By comparison, there are 980,000 restaurants in the US. The federal government has effectively stopped issuing bank charters (although one was approved last week; the first in nearly three years), even though the gross amount of money on deposit has climbed to $9.6 trillion, which is near its historic high. With such an exclusive grant to take deposits, which could effectively cost some banks less than $0 today, banks have an obligation to at least behave like proper citizens. HSBC did not — and has not — done so. I mean, HSBC was banking al Qaeda, for crying out loud.
Matt, you raise an interesting question though: would the consumer be better off without HSBC? HSBC provides banking services to more than 100 million retail customers worldwide, so shutting HSBC down would clearly be detrimental to a lot of people. I was thinking about this yesterday, and after your comment, I’d like to change my call. Rather than revoking its license, HSBC should be broken into its pieces, by country. It should not be allowed to operate in its monolithic fashion. You would argue, “But, JJ, that will add so much cost into the system, and presumably many of those individual banks would fail.” Perhaps. But I am willing to bet that the benefits of breaking up HSBC outweigh those costs — and those benefits are not just in better service at the HSBC spin offs, but in Brian Moynihan amending his statement to “We have a right to make a profit, as long as we remain good citizens of society.”
Thank you, JJ, for responding and the articulate thoughts back.
I agree that financial institutions, like most all companies, have an obligation to behave in a socially responsible manner. I think, when you break it down to an individual level, most employees honestly believe that they are trying their best to meet those goals within the constraints of their environment.
Unfortunately, as organizations grow larger and larger, employees sometimes lose the ability or courage to do what they know is the socially responsible thing in terms of servicing the customer as their hands are tied in terms of “corporate policy and procedures” which they fear from straying from because of potential reprimands or losing employment.
With regards to HSBC’s less than ideal customer, I won’t defend it. Obviously, KYC was not applied correctly and measures should ben taken to tighten those procedures.
Finally, to your point on breaking up HSBC by country, are you suggesting that HSBC should operate as completely separate entities in each individual country? Would you suggest the same for other major global retail banks that are expanding into other markets like Santander?
Totally agree with all your points re size and KYC, Matt.
As for breaking up other major global retail banks, if they do not behave in a socially responsible manner, perhaps yes. But I am not suggesting that all global banks are dismantled, just those that blatantly abuse the privilege of their bank charter, which appears to be the case with HSBC.
I have an update for everyone.
So HSBC has reinstated my account, for which I am grateful, and they offered their most sincerest apologies from the Regional Director of Business Banking. I didn’t receive a response via Social Media to-date, but that is most clearly a platform and policy issue – HSBC simply doesn’t engage customers globally via Twitter (they do have a small presence in UK with limited coverage). However, the more interesting outcome is what has happened since this article aired:
1. HSBC is allowing customers to reinstate their account until the 10th of January to find time to open a new account
2. The call centre has a revised procedure in place, and
3. Mark Luppi, the Head of Business Banking, has sent emails to effected customers informing them of their options
I count it a success that we did get these concessions or process changes from HSBC as a result of our combined action as a community. While some may say that it’s all well and good that I got my account re-opened, the real victory here is that HSBC admitted they had some real customer service process issues and moved to rectify those problems – as a direct result of our combined action and social media noise.
Well done guys – we are a force to be reckoned with!
BK
I have an update for everyone.
So HSBC has reinstated my account, for which I am grateful, and they offered their most sincerest apologies from the Regional Director of Business Banking. I didn’t receive a response via Social Media to-date, but that is most clearly a platform and policy issue – HSBC simply doesn’t engage customers globally via Twitter (they do have a small presence in UK with limited coverage). However, the more interesting outcome is what has happened since this article aired:
1. HSBC is allowing customers to reinstate their account until the 10th of January to find time to open a new account
2. The call centre has a revised procedure in place, and
3. Mark Luppi, the Head of Business Banking, has sent emails to effected customers informing them of their options
I count it a success that we did get these concessions or process changes from HSBC as a result of our combined action as a community. While some may say that it’s all well and good that I got my account re-opened, the real victory here is that HSBC admitted they had some real customer service process issues and moved to rectify those problems – as a direct result of our combined action and social media noise.
Well done guys – we are a force to be reckoned with!
BK
I am one of the small business owners who, like Brett King, found out about the closure of our account earlier this week by accident when logging onto our account online to discover Zero fund balance. We never received our letter of notification either via regular usps.
After two business days on the phone with god knows how many people here and abroad i did get a verbal confirmation that my account would be reactivated this monday until mid January. But for us, the damage had been done as the largest chunk of monthly operational expenses – rent, health insurance, staff — are paid out on the first of the month – a standard business cycle. Our clients are billed monthly on the 1st of the month with NET 30 payable terms for this reason. The timing of HSBCs closure could not have been worse for us: they emptied our account and mailed us a check for the balance (which, incidentally will take 7-10 business days to get here) when it was full of funds to pay those early outgoing expenses. They said that once the check gets here i can redeposit it in my reactivated bank account which takes an additional couple of days to clear.
Over the last two months, i either spoke to HSBC via phone or was logged on online to the bank every other day. They also have my email address. Never was any effort made to followup or ensure we knew this would be happening. I know Small Business banking margins are low and our needs are many, but this whole experience is a demonstration of the vilest aspects of how banks have broken the social contract with their customers and in my mind with the health and best interests of the economy.
Both my grandfather and father worked in the financial services industry in London and i was brought up to believe in banks and financial institutions as positive things who had a duty to serve the needs of their community. Like lawyers and accountants and doctors. By the early 90s, my father actively discouraged me and my siblings from following in the family line of work because he could foresee what was happening, and cautioned that banking would never more in his our lifetime be about serving its clients.
Thanks, Zoe. That is simply terrible for you and your business. Best of luck picking up the pieces and finding a better bank!
I had a shocking development on Friday. When I went to the ATM to make a deposit and withdrawal, the machine accepted the deposit but would not allow me access to my accts to withdraw.
When I called the Premier Customer Service hotline, the agent informed me that all my accounts were being closed but had no explanation. I was told checks for both my savings and checking would be cut and sent via US Mail in 3-4 business days.
Note this was done on the Friday before a holiday wknd, a more inconvenient time could not have been selected. I’m facing the prospect of not having access to my money for another week.
My mortgage through HSBC is due and automatic payment was scheduled for Saturday will now not occur. There are other bills I also have due. To to add insult to injury direct deposit from my job was made on Friday which I don’t have access to either.
I have received no notification of this action by mail or in the webmail bank mail feature. The call center instructed me to call my home branch tomorrow but I’m expecting zero satisfaction from that conversation.
This is by far the biggest customer service fail I’ve experienced to date. They have not implemented any of the safeguards listed above.
I have been with HSBC Bank USA for 7 years .The customer service in this bank has exceeded my expectations. Manager helped me get organized in a way that has helped me grow my business. I recommend that any young entrepreneur or start up to get signed up with their business banking services as it can be difficult for an artist/creative person to get organized. I also have an account here and I am very satisfied with this bank. Incidentally, if you are searching information about HSBC Bank USA you can find it here http://www.usbankinginfo.com/bank/hsbc-bank-usa/