More than 40,000 borrowers are in line to receive thousands of pounds in compensation following a High Court ruling over the wording of documents sent out by lender Northern Rock.
Northern Rock Asset Management (NRAM), the state-owned remnant of Northern Rock plc, will have to pay £258m of taxpayer funds in refunded interest to 41,000 borrowers if it does not overturn the decision.
The case relates to Northern Rock’s ‘Together Mortgage’, which allowed customers to borrow up to 95% of the value of their home on a secured basis, as well as take out an unsecured loan of up to £30,000.
In 2012, NRAM had to pay out £270m in refunded interest after the bank failed to make mandatory disclosures in customer letters since 2008.
In today’s case covering the period 1999 to 2008, unsecured loans of between £25,000 and £30,000 used the same documentation as smaller loans which are subject to the 1974 Consumer Credit Act.
NRAM, which is part of UK Asset Resolution, brought the case against itself to test whether customers are owed compensation because agreements were documented as though they were regulated by the 1974 Act.
UKAR chief executive Richard Banks said: “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.”