Northern Rock borrowers set for compensation

Northern Rock branch Image copyright PA
Image caption The Northern Rock 'good' bank was bought by Virgin Money

Some 43,000 borrowers are set to get compensation after a High Court ruling over the wording of documents sent out by former bank Northern Rock.

Northern Rock Asset Management (NRAM), the nationalised "bad bank" remains of Northern Rock plc, will have to pay £261m in refunded interest.

The case related to Northern Rock's "Together Mortgage", and questioned the wording in past loan documents.

NRAM is now considering whether to appeal against 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.

The compensation will come in the form of a shorter loan period.

The Together Mortgage allowed unsecured loans of up to £30,000 alongside mortgages, to be repaid at the same rate as the mortgage.

But the High Court said paperwork relating to unsecured loans of between £25,000 and £30,000 pounds taken out between 1999 and 2008 were incorrect, and that customers should be paid back interest and fees.

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

Newcastle-based Northern Rock was nationalised in 2008 following its near collapse at the onset of the global credit crunch.

Two years later it was split into a "good" and a "bad' bank, with the Northern Rock name transferred to the good bank.

In late 2011 Virgin Money bought the good part of the business, and discontinued the Northern Rock name.

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