- 04
- Mar
Northern Rock the bank now most famous for having created the only run on a bank in over a hundred years and was bailed out by the Bank of England has now been accused of refusing to return the favour to some of its struggling customers.
Ron Hutcheon a solicitor from Liverpool and a partner at his company are currently defending actions brought by Northern Rock to the court against two borrowers from the bank. Mr Hutcheon believes that the case could lead to a landmark ruling over how banks treat borrowers who are finding it difficult to repay their debt.
Mr Hutcheon’s clients were both finding it increasingly difficult to pay off unsecured loans that they had taken out from the bank and a number of other lenders. On the advice of their insolvency expert both borrowers decided to take out an individual voluntary arrangement (IVA). This means that the lender agrees to write off a proportion of the debt while the borrower agrees to make monthly repayments for the next five years.
However before an IVA can be agreed to the majority lender, in this case Northern Rock has to agree to the arrangement. While all other lenders involved in the case agreed to the terms of the IVA, Northern Rock has refused to do so.
Northern Rock decided instead to take court action against the two lenders and obtaining a charging order against them. A charging loan means that the debt now becomes secured against the value of their property. If they fail to make repayments than both borrowers risk losing their homes.
The lawyers for the two borrowers have found that it seems to be common practice for Northern Rock to reject IVAs. If the court rules against Northern Rock than the bank may be forced to agree to IVAs in the future.
Mr Hutcheon is confident that his clients have a strong case and if they win there could be many more cases like the one currently in the courts coming forward in the future. Northern Rock however denies that the automatically reject IVAs. Rather they claim that the bank looks at each case by its individual merits.
