Court of Appeal overturns Northern Rock compensation case

In December, a court judgment said around £260m could be paid out partly by taxpayers, as the government now owns Northern Rock Asset Management, the part of the bank that made the loans.

The case related to Northern Rock's Together Mortgage, which allowed consumers to borrow unsecured loans alongside mortgages.

However the BBC has reported that the decision has now been reversed by the Court of Appeal.

In 2012, NRAM set aside £270m to compensate customers who had borrowed up to £25,000, because documents were wrongly worded under the terms of the Consumer Credit Act.

Northern Rock has also previously acknowledged that it sent letters to customers with loans above this amount that incorrectly told them they were covered by the Act.

In its annual report, the organisation estimated a maximum £240m payout if it was ordered to compensate those borrowers with loans of more than £25,000.

The Financial Ombudsman Service has received about 300 complaints over the last few years relating to NRAM mortgages, from borrowers both above and below the £25,000 threshold.

Northern Rock was sold to Virgin Money in 2008, and its assets are now part of UK Asset Resolution (UKAR).