Northern Rock caught in massive £270bn loan statement error

Business banking news review: week ending 13 Dec 2012

Thanks to a £270 billion loan statement wording error, Northern Rock could owe as much as £1,700 to each of its personal and business loan customers.

As many as 152,000 of the nationalised bank’s lending customers of £25,000 or less are eligible to receiving around £1,775 in average, thanks to missing annual statement information in the wake of a loan paperwork rules change, after an UK Asset Resolution investigation revealed that the annual statements not only had incorrect wording in mandatory paragraphs but also neglected to include the initial borrowed amount.

These failures in implementing rules in a proper manner took place in the wake of the troubled bank’s bailout through the use of taxpayer funds, making it fully owned by the state, in the wake of the credit crisis several years ago. The results of this error will see every customer with a loan being refunded every last penny of interest they paid on the lending since October of 2008, regardless of the interest rates on their loan.

UK Asset Resolution’s chief executive, Richard Banks, remarked on the situation, indicating that Northern Rock Asset Management has complied with its legal responsibilities towards each and every one of its loan customers. UK Asset Regulation is committed to providing resolution to this issue to both the taxpayer and Northern Rock customers, Mr Banks added, indicating that the organisation will be contacting each of these affected customers in order to provide advice on how to proceed through claiming their loan refund.

In related news, both UK and US bank regulators have said recently that they are in the preparatory stages for revealing revised plans to deal with banks in danger of failure. New regulations that would affect cross-border banks may see creditors and shareholders in both countries taking losses in the event of a bank failure, with related rules calling for banks to keep enough capital in reserve to obviate the need for further taxpayer bailouts.

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