Nearly 7,000 HSBC credit card customers will get refunds on debt collection charges added to their bills, following a deal with the financial watchdog.

The bank has agreed to pay £4m to borrowers who were hit with extra fees after falling into arrears on their credit cards between 2003 and 2009. Once the customers fell behind, HSBC referred their debts to solicitors, who added a 16.4pc debt collection charge.

“Those customers will receive redress where they paid more than the actual and necessary cost of collecting their debt. HSBC has agreed their methodology for calculating the actual and necessary cost with the FCA,” the regulator said.

The agreement comes at the end of a long road through various regulators. The Office of Fair Trading told HSBC in 2010 to stop adding unreasonable debt collection charges.

The Financial Conduct Authority originally decided not to investigate, but came back to the issue in 2015 after the Complaints Commissioner described the process as “bordering on the farcical”. The FCA apologised to the complainant, Nicholas Wilson, for its handling of the case.

The affected customers took out cards with HSBC and John Lewis Financial Services, which is now part of the bank.

“We are disappointed that this has happened to a very small number of John Lewis Financial Services Limited customers and are assured by HSBC that the issue has been resolved for them,” said a spokesperson for the John Lewis Partnership.