Compensation worth £261 million for Northern Rock borrowers rejected
Court of Appeal rules mortgage borrowers aren’t entitled to compensation after all.
A High Court ruling, which would have led to 43,000 Northern Rock borrowers getting millions of pounds of compensation, has been overturned by the Court of Appeal.
The case centred on Northern Rock’s ‘Together Mortgage’, which was offered between 1999 and April 2008. It allowed borrowers to take out unsecured loans of up to £30,000 alongside their mortgage, at the same rate.
But borrowers who took out loans over £25,000 along with their mortgages had complained they were misled by the bank.
In December, the High Court found the Northern Rock was at fault because of the wording of the paperwork it sent out and ruled it must pay back £261 million in refunded interest. But now that decision has been reversed.
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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