Individuals who were customers of Northern Rock when the bank was nationalised in 2008 may be entitled to compensation worth approximately 1,800 pounds each.
A statement published by Economic Secretary to the Treasury Sajid Javid, revealed that UK Asset Resolution had identified certain Consumer Credit Act (CCA) regulated loans in the Northern Rock Asset Management portfolio where the loan documentation was not compliant with CCA requirements.
The CCA provides that a lender is restricted in how it can enforce a debt and borrowers are not liable for interest over the period during which the lender has not provided the specified information. According to Javid's statement, the period of non-compliance originates from changes to the CCA implemented in 2008 before the separation of Northern Rock Asset Management and Northern Rock.
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Following an internal investigation undertaken by UK Asset Resolution (UKAR), Javid stated that UKAR has recommended making proactive restitution to affected NRAM customers in receipt of non-complianty statements and default notices relating to CCA-reglated loans.
The cost to NRAM of remediating the interest charges on affected accounts is estimated at £270m. Northern Rock Asset Management estimates that some 152,000 customers were effected. If all of them are eligible, then the individual compensation will be £1776.32.
UKAR has confirmed that NRAM has the financial resources to make the remediation. NRAM's interim financial results for the six months to June 2012 show a statutory profit before taxation of £305m.
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