Northern Rock will avoid payout over loans

A court has reversed a decision that would have led to compensation being paid to 43,000 borrowers with the former bank Northern Rock.

In 2012, Northern Rock Asset Management had to pay out £270m in refunded interest after the bank failed to make mandatory disclosures in customer letters from 2008.

But NRAM, which is part of Newcastle-based UK Asset Resolution, sought clarification which has resulted in a successful appeal. NRAM Plc had made a provision for the compensation and is now likely to release that.

The firm had hoped to secure legally-binding confirmation that customers with loans of £25,000 or more were not entitled to have their interest payments written off or returned.

The appeal focused on the wording of 41,000 past loans of the formerly bailed-out bank.

For loans taken out before 6 April 2008, CCA only applies where the amount we agreed to lend you (the amount of credit) was £25,000 or less.

“NRAM is committed to acting in full accordance with the law and to treating customers and taxpayers fairly”.

But the BBC reports the Court of Appeal has now reversed that decision.

Together mortgages were offered by Northern Rock from 1999 to customers who wished to take an unsecured loan of up to £30,000 alongside their mortgage, and repay the “top-up” loan at the same rate.