Northern Rock forced to pay 43,000 customers compensation
11/12/2014
Former high street bank Northern Rock has been ordered to pay 43,000 borrowers compensation over misleading wording of past loan documents.
A High Court ruling confirmed that Northern Rock Asset Management (NRAM), the nationalised remains of Northern Rock PLC, will have to pay £261 million to previous customers.
The ruling relates to the banks “Together Mortgage”, which allowed unsecured loans of up to £30,000 to be taken out alongside mortgages, and to be paid back at the same time. The High Court said paperwork relating to unsecured loans of between £25,000 and £30,000 taken out between 1999 and 2008 was incorrect, and that customers should be paid back interest and fees.
NRAM has already set aside £270 million for customers who had borrowed up to £25,000, but customers who borrowed more were not included . However, The new ruling means customers who borrowed more than £25,000 are now due compensation as well. NRAM is considering weather to appeal the ruling.
The total payout is expected to see each affected borrower refunded an average of about £6,000, with the total overall bill being paid in part by the UK taxpayer.
Richard Banks, Chief Executive Officer of UKAR, owners of NRAM,said:
“We brought this case to the High Court because we are determined to act in full accordance with the law and do the right thing for both customers and taxpayers.
"We are disappointed by the decision because no detriment has been suffered by customers.
"We are now considering the impact of the judgment and taking legal advice on whether to appeal. Customers do not need to act at this stage. If any redress becomes due, we will write to all those affected to advise on next steps.”
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