Customers of Northern Rock (Asset Management) (NRAM) who took out secured loans after 2008 are to be compensated a total of ?270 million due to irregularities in the documentation of the loans.
Following changes to the Consumer Credit Act (CCA) in 2008, which was before the separation of NRAM and Northern Rock, certain letters and statements were sent to customers that did not comply with all the CAA requirements.
This has been brought to light following the transfer of the NRAM loans onto the UK Asset Resolution (UKAR) IT platform. NRAM mortgages and standalone unsecured personal loans are unaffected.Customers will receive letters in the coming days informing them of their entitlement to redress. They will also be sent revised documentation that contains all of the compulsory account information and precise wording required by the CCA.
The remediation is not expected to delay materially the ultimate timing of the repayment of the NRAM government funding, which stood at ?19.6 billion as at June 2012. The Treasury continues to estimate that it will fully recover all the taxpayer support provided to NRAM.
The UKAR board has asked Deloitte to conduct an independent enquiry into the specific circumstances of this issue and to make recommendations on potential enhancements to the associated processes and controls.
Chief executive of UKAR Richard Banks said: ?NRAM 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. We have not received any complaints or claims as a result of this matter and as far as we are aware it has not resulted in financial loss for customers."
Update on business performance
NRAM has continued to perform strongly and arrears levels have fallen by 18 per cent over the course of 2012.?The number and proportion of customers three months or more in arrears at the end of November 2012 was 19,941 or 6.5 per cent of the total mortgage book, down from 24,449 or 7.2 per cent at the end of 2011.
Further repayments of the NRAM government loan have been made. In the eleven months to the end of November 2012, ?1,370 million had been repaid reducing the total funding balance to ?18.5 billion.?This brings the total NRAM loan repayments to ?3,470 million since the formation of UKAR.
NRAM's interim financial results for the six months to June 2012 show a statutory profit before tax of ?305 million, and NRAM is expected to remain profitable in 2012.
Date: December 11, 2012
Author: Joanne Atkin
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