George Osborne has announced that Northern Rock personal loan customers will receive an average pay-out of £1,775 following administrative errors.
The Chancellor revealed that customers who took out personal loans of less than £25,000 will be entitled to recompense after staff at Northern Rock failed to include important information on annual statements, including the original amount that had been borrowed. Many of the loans were taken out in conjunction with Northern Rock’s Together mortgage.
Failure to abide by loan regulation
The rules governing on loan information changed in October 2008, but as Northern Rock did not abide by the requirements, all customers who have been sent loan documentation since then are entitled to redress. The error was discovered following an investigation conducted by UK Asset Resolution (UKAR), which oversees banks that were rescued by the government and the taxpayer.
Northern Rock loan customers will be contacted
According to HM Treasury, affected consumers do not need to take action for now, as Sajid Javid, economic secretary to the Treasury said: ‘Where redress is required, this will be made by correcting a customer’s account balance to reverse the consequences of them being charged any interest over the period in which the documentation is non-compliant.
‘UKAR will contact potentially-affected customers in writing with further information. Northern Rock Asset Management will be writing to all existing customers in the next few days.’
Repayment of taxpayer bailout will go ahead on schedule
It is estimated that 45,000 customers who have since paid off their loans, as well as 107,000 current loan customers, will be written to. Those who have repaid their loans will receive a refund of the interest charged. The Treasury has said that the pay-outs will not delay the repayment of the government’s funding of Northern Rock, which stood at £19.5 billion in June.This story was updated on 13/12/2012 to reflect that all customers who were sent loan documentation would be entitled to redress.