HSBC, the banking giant, today scrapped plans to charge interest on graduate overdrafts after a campaign against the move was launched on Facebook, the social networking website.

The virtual "Stop the Great HSBC Graduate Rip-Off" protest was organised by the National Union of Students, which had called for a boycott of Britain’s largest bank. The campaign attracted nearly 5,000 members on the Facebook site.

HSBC said that its decision to rethink a proposed 9.9 per cent interest charge on recently graduated students who racked up a deficit on their account proved that it was not “too big” to listen to customer concerns.

The move would have cost a graduate who had the maximum interest-free overdraft of £1,500 more than £142 a year.

HSBC's decision underscores the growing influence of social networks. Unknown two years ago, the sites – a combination of communication, information and gossip – have become particularly popular with students.

Facebook, currently the fastest growing network in the UK, was developed by Mark Zuckerberg while he was studying at Harvard.

Social networks are visited by more than six million Britons a month, and are growing rapidly, according to Ofcom. Figures published by the media watchdog last week showed that one in four people with an internet connection at home now uses a social networking site – rising to nearly a third among 15 to 24-year-olds.

Attracting users from that age bracket is key to high street banks, which go on to reap profits when customers enter the jobs market. Britons are famously unlikely to switch banks later in life, even though they may not be getting the best deals.

HSBC had claimed that the proposed fees were justified as many students and graduates were opening several bank accounts to make use of free overdraft facilities. It had said that the move would also counter a growing trend for student debtors to “effectively disappear” after graduating, leaving bills unpaid.

Andy Ripley, HSBC’s head of product development, said: “Following the feedback from our graduate account holders, both directly and via the National Union of Students, we have taken the decision to freeze interest charging on 2007 graduates’ overdrafts up to £1,500.”

HSBC added that it would also refund any overdraft interest it charged people during August.

Zma Uzowuru, the NUS vice-president for welfare, said: "We are pleased that HSBC has recognised that this policy would hit graduates just as they are at their most vulnerable.

“Students often struggle in low-paid, insecure jobs upon graduation and the prospect of having the security of the interest-free graduate service pulled from under their feet is clearly unacceptable. Graduates are now more likely to be in debt than ever before.”

Last month, HSBC said it was forced to hand back more than £100 million in improper overdraft charges to UK customers during the first half of the year. The move followed an industry-wide investigation by the Office of Fair Trading.

Despite the charges, HSBC returned forecast-beating profits of £7 billion for the first six months of 2007.

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© Copyright 2007 Times Newspapers Ltd.

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