Northern Rock borrowers' £261 million compensation rejected
Borrowers aren't getting compensation following Court of Appeal ruling.
The Court of Appeal has reversed a decision which would have led to 43,000 former Northern Rock borrowers getting compensation.
People who took out loans over £25,000 with their mortgage complained about being misled.
The High Court’s original December ruling found fault with the wording of documents sent out by the bank, meaning that it would have to pay £261 million in refunded interest.
Northern Rock’s ‘Together Mortgage’, offered between 1999 and April 2008, allowed borrowers to take out unsecured loans of up to £30,000 alongside their mortgages, which would be repaid at the same rate as the mortgage.
The case
Northern Rock Asset Management (NRAM) brought the case against itself after it received 277 complaints that the Together Mortgage was incorrectly worded.
NRAM is a part of UK Asset Resolution which was set up by the Government in 2010 to manage the closed mortgage books of Bradford and Bingley and NRAM.
Borrowers complained that statements showed the balance but not the original loan amount, required under the 1974 Consumer Credit Act.
However, NRAM successfully argued that those people weren’t entitled to compensation under the Consumer Credit Act, despite the agreements incorrectly saying they were covered, as it doesn't apply to loans over £25,000.
In 2012, NRAM had to pay out £270 million in refunded interest after the bank failed to disclose important details in customer correspondence it sent out in 2008.
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