The claim has been made by specialist litigation law firm Harcus Parker on behalf of the Mortgage Prisoners group against Northern Rock and Bradford & Bingley in their current forms; NRAM Limited, an asset holding company which held the bad debts of the former Northern Rock; and Mortgage Agency Services Numbers 1-7 Limited, financial service subsidiaries of The Co-operative Banking Group.
The core claim is that lenders were required to treat the mortgage prisoners fairly and to set their rates at a fair level.
While the government, Financial Conduct Authority and UK Finance are making attempts to address the concerns of mortgage prisoners and propose measures to help them, the law firm said this legal action would correct the overpayments made by the borrowers due to high interest rates.
For example, some borrowers with Northern Rock ‘Together Mortgages’ who have been paying rates of up to 15 per cent on unsecured loans of up to £30,000 will claim they have overpaid more than £30,000 in interest.
NRAM declined to comment when contacted by Mortgage Solutions and the Co-operative Bank has not responded.
The Mortgage Prisoners group is an organisation of people who have been on a standard variable rate (SVR) mortgage since the 2008 financial crash.
Many took out mortgages with Northern Rock, Bradford & Bingley or its brand Mortgage Express, before the lenders were taken into public ownership after the financial crash.
The companies then became inactive lenders, or their mortgage books were sold to the likes of the now inactive subsidiaries of TSB and the Co-operative Bank.
Once the borrowers’ fixed-term mortgages ended, some say they were not offered new deals due to new lending criteria put in place since the crash.
Potential multi-million pound claim
Harcus Parker said it was “impossible” to put a figure on the total claim, but said it was likely to amount to millions of pounds.
Damon Parker, managing partner of the law firm, said: “Our clients are regular, hard-working people who have done nothing wrong. Nevertheless, they have been unfairly treated and stigmatised by the failings of the banking system.
“Many of our clients have told us that, before they joined our group, they thought they were alone. Many have felt ashamed about being in financial hardship and of the impact it has had on their families. By bringing a claim as part of a group, they are benefiting from strength in numbers.”
Rachel Neale, who chairs the committee of Mortgage Prisoners that has instructed Harcus Parker, added: “This situation has affected my family severely, and made me want to campaign on the issue and organise the group.
“I have spent time with the All-Party Parliamentary Groups on Mortgage Prisoners and on Fair Business Banking, and have tried to meet decision-makers at the major lenders in order to try to change their attitude towards people in our position. I have a particular interest in the effect of financial problems on mental health.
“By bringing this litigation, I naturally want to help to ensure that we all achieve financial recompense, but I also want to highlight the issues so that others are not affected in the same in future,” she said.