Civil way: 23 January 2015

NOT AS IT SEEMS

Prior to 6 April 2008 consumer credit agreements for more than £25,000 were not regulated by the Consumer Credit Act 1974 (CCA 1974). For nine years before then, Northern Rock had a product which allowed borrowers to take out an unsecured loan as an adjunct to their mortgage under which interest was charged at the mortgage rate. However, Northern Rock used the same paperwork for these over £25,000 loans as they did for the £25,000 and under loans (as did certain other lenders). Not only the loan agreement itself but the pre-contractual and other contractual documentation repeatedly informed borrowers that the loan was regulated and that they would benefit from the rights available under CCA 1974.

The failure to distinguish between what was regulated and what was intended by the Northern Rock to be unregulated has presented headaches which a bucketful of aspirin would fail to mitigate for the state-owned Northern Rock successor company. They arise because it was discovered that the