Notorious Northern Rock to Buy Back Bad Debt
The now notorious high street bank, Northern Rock, nationalised to safeguard its customers and itself against the crippling effect of the credit crunch, is now offering to buy back bad debt. In a move that it hopes will generate an estimated £700million, Northern Rock intends to buy back the junk debt at a fraction of the original value and begin to chase the payments.
On one hand, it is hoped that this activity will reduce the overall cost to the taxpayer. At present, an estimated £1.6billion of tax payers’ money is ready to be moved into the bank to counterbalance any losses associated with bad mortgage debt. However, after making a loss in the region of £140million during the second half of 2009, things are looking up in 2010, with Northern Rock back in the black for the first quarter. This has been facilitated by an average increase of 10% in house prices and the low rate of interest.
A significant proportion of Northern Rock is performing well, with about £10billion worth of stable mortgages and £20billion worth of deposits but the banks Channel Island operation on Guernsey is going to be closed. This will leave about 6000 customers looking for a new home for savings worth nearly a billion pounds and with just under 3 months to close their accounts.
To be clear, junk debt is essentially a debt that has past the debt collection statute of limitations, which makes it much cheaper to buy. So, for the original owner of the debt, it’s been settled; most often through bankruptcy. Once upon a time though, very few creditors would ever bother to try and collect a junk debt because it wasn’t deemed to be worth the effort or expense. However, in this recession inspired environment of fiscal belt-tightening and penny pinching, the thought that there could actually be money to be made from these old, out of statute debts has sparked a bad credit gold rush.
So, even after you have successfully completed the terms of your debt solution, it‘s still possible that you could be contacted by someone chasing the debt. Remember, the statute of limitations on the debt has expired. You need to talk to a specialist debt advisor who can let you know where you stand. Don’t give any information or sign up to any payment plan until you know exactly what’s expected of you. Talking to a debt advisor can help you to get this straight.
Northern Rock obviously feels there is a significant amount of money to be made from buying back this debt but for the vast majority of people, the situation will already seem resolved and the debts settled.
Related posts:
