Mersey lawyer battles for Northern Rock customers

Oct 1 2007 by Jessica Shaughnessy, Liverpool Daily Post

A MERSEYSIDE solicitor is leading a landmark case against troubled bank Northern Rock for the way it is treating customers in debt.

Ron Hutcheon, a partner at Liverpool-based R James Hutcheon Solicitors, says the financial company, which had to be bailed out by the Bank of England, is refusing to help its customers in the same position.

He is defending actions brought against two debtors by Northern Rock, which have left them in danger of losing their homes.

Mr Hutcheon’s clients both took expert financial advice and decided to take out Individual Voluntary Arrangements (IVAs), where a lender agrees to write off a proportion of the debt in exchange for monthly repayments over five years.

Before the IVAs could be set up, Northern Rock had to vote in favour of the arrangement as the majority lender in both cases. But, though other creditors had agreed repayments in the debt plan, Northern Rock refused to agree and took immediate court action.

As a result, charging orders were put against the debtors, meaning the debts are now secured against their property. If they continue to struggle with repayments, they could lose their homes.

Mr Hutcheon said: “Rejecting the IVAs might be good commercial practice for Northern Rock as it could be seen to be trying to reduce the risk of the debt not being paid back.

“However, we think the way it has treated these two customers is unfair in respect of the Banking Code, which says that banks must treat those who run into difficulties positively and fairly. Neither debtor was offered debt counselling and instead turned to an insolvency practitioner.

“The resulting IVAs in both cases appear on paper to be a good proposal as an alternative to bankruptcy.

“But, in both cases, Northern Rock went straight for a charging order instead, turning unsecured debt into secured debt.”

Mr Hutcheon said he could quote more than 10 insolvency practitioners who stated that Northern Rock had an unusually high rejection rate.

Steve Rhode, chairman of Myvesta, which sets up IVAs and other debt solutions, says Northern Rock is not the only lender which is making it difficult for debtors to take out IVAs, but that the Newcastle-based bank is the “bully on the block”.

A Northern Rock spokesman said: “Our fundamental policy on IVAs is that each case is reviewed on its merits, with careful consideration given to the interests of both the borrower and Northern Rock. This is entirely in keeping with the principle of treating customers fairly.

jessicashaughnessy