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The High Court decided that 41,000 customers of Northern Rock should be paid compensation due to incorrect wording in their loan documents. With a total award of £258m, that means that the average refund would be roughly £6,300.

Affected customers would be those who obtained “Together” mortgages, which were essentially unsecured loans that customers obtained in addition to their secured mortgage. Anyone who borrowed between £25,000 and £30,000 in the years between 1999 and 2008 could be included in the refund order.

Northern Rock failed during the financial crisis of 2008, leading to a government takeover of all assets. The nationalised firm continues to operate as Northern Rock Asset Management (NRAM).

The High Court is clearly taking the stance that customers rights under the Consumer Credit Act were violated. The penalty is being assessed against the bank for not providing the proper wording in its contracts. Customers were provided with documents that are flawed.

NRAM argues that no compensation should be authorised since none of the customers were harmed as a result of the wording. They claim there should be no punitive damages paid as a result of the error.

Some loan customers believe the opposite. If any customer desires to challenge the legality of the documents, they would likely need to hire an attorney. Now they have money to use for that purpose if they choose this option.

The £258m penalty is just under the £270m that NRAM set aside in 2012 in anticipation of the ruling. They were not blindsided and have already prepared to make the refunds available if the High Court ruled against them.

Still the bank is not pleased with the ruling. They have indicated that they may appeal the decision.

Some customers who have already repaid their loans could receive the funds directly. Most account holders who still have a balance will have the amount deducted from their existing balance. This will reduce the amount that they owe but would not change any other aspect of their repayment terms.

It essentially reduces the amount of time that they will make their normal monthly payment. Someone could reduce the monthly payment by replacing the loan with a new loan, though it would be unlikely to make much difference at a similar interest rate. The advantage would be if a lower rate was possible, which could create quite a reduction in the monthly payment amount.

The court decision brings an end to a case that rose to prominence as a result of nearly 300 complaints that were fielded by the Financial Ombudsman Service. It shows how much protection consumers can have if enough people speak up and demand to be treated fairly by their banks. There is power in numbers. In this case, 300 complaints led to sizable refunds for 41,000 customers.

Current and former account holders who are eligible for the refunds will be contacted directly by NRAM. If advice is requested on how to handle an individual situation, customers are encouraged to contact their closest money advice service or Citizens Action Bureau.

Any non-customers who see this as a victory should be reminded that the bank was nationalised. This means that any refunds will be paid out of taxpayer coffers.