FTAdviser.com

Advertising

Last week, the lender came under fire for reducing its standard variable rate by just 0.15 of a percentage point in spite of 50 basis points being slashed off the base rate by the Bank of England.

During a Cicero Forum, Stephen Knight, former chairman of GMAC-RFC, questioned why the lender had not been hauled in front of the FSA to explain why it was not treating customers fairly and reducing its rates.

He questioned whether the nationalised lender was able to prioritise repaying its Treasury loan over its treating customers fairly responsibilities.

He said: "The people running Northern Rock have a responsibility to pay back the loan as quickly as possible. Will this create a conflict with treating customers fairly requirements?"

However, Northern Rock denied the claim it was failing to treat customers fairly while the FSA stated pricing issues were not part of its mandate.

Simon Hall, assistant director of corporate communications for Northern Rock, said: "There is no special treatment. We are subject to the same principles of TCF as other lenders are in the UK."

However Mr Hall said the lender's main objective was to repay the government debt and the primary mechanism for achieving that was by encouraging customers to redeem their loans with another lender to reduce its balance sheet.

He said: "So that is what we are working towards and our decision on SVR reflects that situation."

When asked if Northern Rock was being given any preferential treatment with regards to TCF Robin Gordon-Walker, press officer for the FSA, said: "The key point is mortgage regulation was never intended to cover actual price and so that is not a matter that we can be involved in or touches on TCF in our terms.

"It is entirely up to the managers and operators of any particular lender how they price their products or whether they pass on cuts or increases. It is always a matter for the lender."

Mr Knight's comments were made on the same day the lender was attacked by a member of parliament for its arrears handling procedure.

During a Treasury select committee on the economics of the housing market, George Mudie MP accused Northern Rock of taking an aggressive stance and creating unfair terms in order to repossess borrowers homes.

In response to this Mr Hall said: "We refute any suggestion we have adopted an overly aggressive stance to repossession.

"It is clearly in the best interests of both the customer and Northern Rock to come to an agreement that results in any customer who has fallen into arrears continuing to make repayments and for them to remain in their home. That is our objective."

Mr Gordon-Walker said the FSA expected all lenders to adhere to TCF guidelines on arrears handling.

He said: "We have written principles they have to follow and they do need to treat customers fairly when a customer gets into arrears. That is a general rule that applies to all lenders but we do not comment on individual lenders."