The High Court (Commercial) has ruled that Northern Rock Asset Management (NRAM) formerly Northern Rock must pay out compensation to 41,000 former Northern Rock customers because of incorrect wording in Unsecured Together Loan Agreements.
Between 1999 and 2008 Northern Rock offered a product called Together Mortgage. The product allowed borrowers to borrow up to 95% of the value of their home on a secured loan, and in addition, take out a fixed unsecured loan of up to 30% of the value of their home, capped at £30,000.
However, the agreements entered into by consumers between 1999 and 2008 failed to differentiate between regulated and unregulated agreements. The same documentation was used for loans exceeding £25,000 as was used for loans of £25,000 or less.
However, the agreements entered into by consumers between 1999 and 2008 failed to differentiate between regulated and unregulated agreements. The same documentation was used for loans exceeding £25,000 as was used for loans of £25,000 or less.
Northern Rock Asset Management took the case against Jeffery McAdam and Ann Hartley. Both availed of a Together Mortgage in addition to taking out an unsecured loan of £30,000. The case was also taken in an effort to secure a legally binding opinion that its customers with loans in excess £25,000 were not entitled to compensation.
However, Mr. Justice Michael Burton found the rights and remedies under section 77A of the Consumer Credit Act 1974 were applicable to Unsecured Together Loan Agreements. The failure of Northern Rock to indemnify Mr. McAdam and Ms. Hartley under the Act was a breach of its obligations under the Agreement.
The judgment means the public limited company could pay out approximately £258m, or roughly £6,300 per customer.
However, Mr. Justice Michael Burton found the rights and remedies under section 77A of the Consumer Credit Act 1974 were applicable to Unsecured Together Loan Agreements. The failure of Northern Rock to indemnify Mr. McAdam and Ms. Hartley under the Act was a breach of its obligations under the Agreement.
The judgment means the public limited company could pay out approximately £258m, or roughly £6,300 per customer.
In 2012, Northern Rock Asset Management had to allocate roughly £270 to repay customers who had borrowed up to £25,000 because the wording in the documents failed to differentiate between regulated and unregulated agreements under the Consumer Credit Act 1974.
