Northern Rock borrowers are set to receive £261m in compensation after winning a High Court case against the former bank.
Northern Rock Asset Management, the nationalised “bad bank”, will have to pay an average of £6,000 in refunded interest to 43,000 borrowers.
The case relates to Northern Rock’s infamous “Together Mortgage”, which allowed consumers to borrow up to 125 per cent of a property’s value.
The High Court ruled that paperwork relating to unsecured loans of between £25,000 and £30,000 taken out between 1999 and 2008 was incorrect, and customers should be paid back interest and fees.
In 2012, Northern Rock had to pay £270m in compensation for the same error, but only refunded those with loans of less than £25,000.
Loan documents were incorrectly worded under the Consumer Credit Act, but customers suffered no financial detriment.
NRAM says it is taking legal advice on whether to appeal the ruling.
Richard Banks, chief executive of UK Asset Resolution, which was established in 2010 to manage the closed mortgage books of NRAM and Bradford & Bingley, says: “We brought this case to the High Court because we are determined to act in full accordance with the law and do the right thing for both customers and taxpayers.
“We are disappointed by the decision because no detriment has been suffered by customers. We are now considering the impact of the judgment and taking legal advice on whether to appeal. If any redress becomes due, we will write to all those affected to advise on next steps.”