Northern Rock takes itself to court

[Michael Browne]

The state-owned arm of Northern Rock has brought a legal claim against itself to test whether or not it owes compensation to 43,000 customers who took out loans before the building society’s collapse.

 

Northern Rock Asset Management (NRAM) is on Tuesday appearing at the Commercial Court in London in the hope of getting legally-binding confirmation that customers with loans of £25,000 or more are not entitled to have their interest payments returned or written off.

 

One of the defendants in the case is named as Jeffrey McAdam, who leads unsecured debt recovery for UK Asset Resolution (UKAR), the parent body of the Northern Rock assets not already sold off or wound down. He is understood to hold one of the loans involved in the case.

 

UKAR set aside £271m in 2012 to compensate customerswho had borrowed less than £25,000 before April 2008, after it was found their loan documents did not adhere to the Consumer Credit Act.

 

The organisation has already contacted 152,000 customers to correct the wording of their loan paperwork and some have been compensated for interest that was incorrectly charged.

 

However, there are about 43,000 other customers who took out loans of more than £25,000. These loans would not typically come under the protection of the Consumer Credit Act, as NRAM and its lawyers have long maintained. The Financial Ombudsman Service has also found in the firm's favour.

 

NRAM has accepted that some of these customers received incorrect letters telling them they were covered by the law.

 

The organisation has brought its own case to court to clarify the exact legal position and confirm its stance on behalf of the affected customers. A ruling is expected before the end of the year.

 

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11236824/Northern-Rocks-bad-bank-takes-itself-to-court-to-confirm-customers-arent-owed-loan-compensation.html