Over a quarter of a million people who took out Northern Rock mortgages between 2001 and 2009 are owed compensation averaging £15 after interest was wrongly calculated on fees charged on their loans, an internal review has discovered.

Northern Rock Asset Management, the taxpayer-owned “bad bank”, has been forced to track down and write to 260,500 affected customers to “remediate and compensate” them for the historic errors despite the relatively small sum owed and the cost.

One Financial Times reader who paid off their mortgage more than a decade ago has been notified by letter that they are in line for compensation of £3.60, consisting of a £1.55 refund plus 8 per cent simple interest. Customers have been told that cheques will be sent out within 28 days.

NRAM said it anticipated the cost of the remediation alone would be £3.5m. It refused to disclose the administrative costs of putting things right, including postage and tracking down customers who had long since cleared their mortgage debts.

Affected customers have been informed that an Equifax credit rating agency check had been carried out to trace them to their current address.

Theoretically, the £1.22 cost of two second class stamps multiplied by the number of customers affected adds up to nearly £318,000.

All of the affected customers incurred additional costs and fees on at least one occasion when they had their mortgage account, for example, making a late payment or being charged for a rejected direct debit.

“In line with the terms and conditions of some NRAM accounts, a notification letter should be issued to a customer allowing them 14 days to pay a fee before interest is charged,” said UK Asset Resolution, the government holding company for the lender.

“Following a review, we identified that in some cases this notification was not issued. We have corrected this issue and are proactively contacting affected customers to provide remediation and apologise for the error.”

When mortgage lenders compensate customers for their mistakes, they typically do so as private businesses drawing on their own resources to make amends. In this case, though, the £3.5m compensation bill for the wrongly charged payments — plus the undisclosed administration costs — are being funded by a state-owned business.

“This is the British taxpayer footing a bill to make trivial payments to lots of people,” said Ray Boulger, senior technical manager at mortgage broker John Charcol. Although regulations required lenders to treat customers fairly at all times, he said the amounts involved in this case were “puny”.

“You have to question the rationality of whether it’s worth spending vast amounts of money redressing something which was of negligible impact to the people originally affected,” he said.

“While we need regulations to protect consumers, this is a good example of where someone doesn’t understand where it’s logical to draw the line,” said Mr Boulger. “I’m sure there are lots of times when consumers have spent £15 on things they shouldn’t have done in other ways. When the amounts are that tiny, I suspect this is a regulatory requirement that’s going way over the top.”

He added that the method of repayment appeared to add unnecessarily to the cost. Making a repayment with a cheque sent through the post was costlier than, say, the Bacs electronic payment system, which costs just a few pennies per transaction.

Earlier this week, PwC was handed a £16.5m contract to manage the UK government’s remaining assets in Northern Rock.

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