UKAR response to Ministerial statement regarding NRAM

11 Dec 2012

We note the Ministerial statement made today by the Economic Secretary to the Treasury regarding customers of Northern Rock (Asset Management) plc (NRAM) who have loan accounts which are regulated under the Consumer Credit Act (CCA).

Following changes to the CCA implemented in 2008 before the separation of NRAM and Northern Rock plc, certain letters and statements have been sent to customers that do not comply with all the requirements prescribed by the CCA. This has been brought to light following the transfer of the NRAM loans onto the UK Asset Resolution (UKAR) IT platform.

Affected customers are now entitled to redress, and will also be sent revised documentation that contains all of the compulsory account information and precise wording required by the CCA. Where redress is required, this will be made by correcting a customer's account balance to reverse the consequences of them being charged any interest over the period in which their documentation is non-compliant.

The total cost to NRAM of remediating the interest charged is estimated at £270m. The remediation is not expected to delay materially the ultimate timing of the repayment of the NRAM government funding, which stood at £19.6bn as at June 2012. The Treasury continues to estimate that it will fully recover all the taxpayer support provided to NRAM.

The OFT regulates the CCA and has been consulted on these administrative errors, as has the FSA. HM Treasury, UK Financial Investments Ltd and legal counsel have also been consulted on the issue and our remediation plans, which are focussed on acting in full accordance with the law, and treating our customers and the taxpayer fairly.

We are currently assessing the full impact of this issue and are writing to all NRAM customers who are affected to advise them on the next steps we will take. NRAM mortgages and standalone unsecured personal loans are unaffected by this issue.

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.

Customers do not need to take any action. We are doing everything possible to resolve this matter and they do not need to contact NRAM, or anyone else about this issue.

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 over 18% over the course of 2012. The number and proportion of customers three months or more in arrears at the end of each period is as follows:


End Nov 2012

30 June 2012

31 December 2011















Further repayments of the NRAM government loan have been made. In the eleven months to the end of November 2012, £1,370m had been repaid reducing the total funding balance to £18.5bn. This brings the total NRAM loan repayments to £3,470m since the formation of UKAR.

NRAM's interim financial results for the 6 months to June 2012 show a statutory profit before taxation of £305m, and NRAM is expected to remain profitable in 2012.



Media Contacts:


Jonathan Glass / Nick Cosgrove

Tel: +44 20 7404 5959




Consumer Credit Act

In the case of loans taken out before 6 April 2008, the CCA only applies where the amount we agreed to lend the customer (the amount of credit) was £25,000 or less.

UK Asset Resolution Limited (UKAR)

UKAR was established on 1 October 2010 to facilitate the orderly management of the closed mortgage books of both Bradford & Bingley (B&B) and Northern Rock Asset Management (NRAM) to maximise value for taxpayers. The Executive team of UKAR manages both organisations focusing on this common objective, while ensuring that both companies continue to treat customers fairly, deliver consistently high levels of service and support those customers facing financial difficulty.

Northern Rock (Asset Management) plc (NRAM)

Northern Rock was nationalised and taken into Government ownership in February 2008 and was then restructured into two legal entities with effect from 1 January 2010 - Northern Rock plc and Northern Rock (Asset Management) plc (NRAM).


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