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Northern Rock customers to receive windfall

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by Jan Harris
Northern Rock customers to receive windfall

Northern Rock customers could receive a windfall of around £1,700 because of an error in the wording of loan statements.

The mistake, made by the nationalised part of the bank, will cost UK taxpayers a total of £270 million.

Up to 152,000 customers who took out personal loans of less than £25,000 will receive an average of £1,775 because information was omitted from annual statements following a change in rules on loan paperwork.

An investigation by UK Asset Resolution, which manages rescued banks for the government, discovered that the statements failed to include the original amount borrowed and paragraphs of mandatory wording were written incorrectly.

The failure to implement the rules correctly occurred after the bank was rescued by the government during the credit crunch, and taken into state ownership.

As a result of the mistake, customers will be refunded all interest charged on the loans since October 2008.

Richard Banks, the chief executive of UK Asset Resolution, said: “Northern Rock Asset Management is acting in accordance with its legal responsibilities and we are determined to do the right thing for customers and the taxpayer.

“We will be writing to all customers who are affected and advising them on next steps.”

In separate news, bank regulators in the US and UK are preparing to reveal plans for dealing with failing banks.

New cross-border regulations are expected to require shareholders and creditors in both the US and UK to take losses and to ensure that banks hold sufficient capital to protect taxpayers in the event of a failure.

The plans are outlined in a joint paper issued by the Bank of England with the US’s Federal Deposit Insurance Corporation.

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News posted: December 11, 2012

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