You can claim for PPI compensation against a bank you still owe money to. Whether or not you will be paid the cash you are awarded will depend on the status of your debt.
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- Claiming for PPI against a debt you still owe
- Can you claim for PPI against an account in arrears?
- Can you keep the compensation if you are in a DMP?
- What if the debt is already settled?
- What if the debt is Statute Barred?
The deadline for claiming for PPI was 29th August 2019. If you did not make your claims before that date you are no longer eligible. No new PPI claims can now be submitted.
Claiming for PPI against a debt you still owe
There is nothing to stop you claiming for PPI compensation against a debt you are still repaying. However if the claim is upheld before sending you the cash the bank will check the status of your account.
The money will be paid to you given non of your accounts are in arrears. The payment is normally in the form of a cheque. This money can then be paid into your account with the bank or anywhere else you choose.
You are free to decide what to do with the money you have received. It can be used for whatever you like and does not have to go towards paying off the debt you owe.
Can you claim for PPI against an account in arrears?
You can certainly claim for PPI compensation if your account is in arrears. The fact you are struggling to repay the debt has no bearing on whether you were mis sold PPI.
However you may not directly receive any compensation you are owed. This is because of the banking Set Off rule. It means that if your account is in arrears the bank can use the compensation they owe you to pay off their debt.
Your arrears do not have to be on the same account as the one you claim for PPI against. The Set Off Rule can be used to repay any account in your name with the same bank which is in arrears.
If your account is in arrears it is of course still well worth while making PPI claims. Any compensation paid will reduce the balance you owe meaning you will be debt free sooner.
Can you keep your PPI Compensation if you are in a DMP?
If you are in a Debt Management Plan (DMP) your creditors have agreed to accept reduced payments towards your debts. However despite this agreement your account is still in arrears.
In these circumstances you can make claims for PPI compensation. However the Set Off Rule is still likely to be used. As such any cash you are awarded will be used to pay off the debt you owe.
It has been argued that this practise is unfair. You may have other more important debts that you need to pay. However the bank can not be penalised for having agreed reduced payments with you.
A DMP can last for a long time. As such making PPI claims against the debts in the Plan can really help you. Any compensation paid will significantly reduce its duration.
What if you have already settled your debt?
You may have previously been struggling to pay a debt but have now paid it in full. In these circumstances any PPI compensation awarded will be yours to do with what you like.
However what if you settled with a lump sum payment? In these circumstances the bank may still argue they can use your compensation for Set Off. This is because the remainder of the debt still exists.
You may be able to fight this if you have a written acceptance of your settlement offer stating the remainder of the debt will be written off. In these circumstances there is no longer a debt to Set Off against.
Statute Barred Debt and PPI Compensation
If you have made no payment towards an outstanding debt for 6 years it may have become Statute Barred. This means the debt can no longer be legally enforced by the creditor.
You no longer have to pay this debt. As such you may think that if you claim for PPI against it any compensation awarded will be paid to you. This is not the case. It will be used to Set Off against the debt
Although you are no longer legally required to pay the outstanding balance it is not written off. The debt still exists. The creditor can therefore use any funds of yours they are holding such as PPI to Set Off against it.
It is unwise to claim for PPI against Statute Barred debt. Any funds awarded will be used to Set Off against the balance. The claim might also be an acknowledgement of the debt and mean it becomes enforceable again.
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Hi. We used Uclaim4me to reclaim PPI from against loans taken out with RBS. These were fully replayed and which we never fell into arrears with. We have been notified that we will be reimbursed £9000 which is fantastic.
My concern is though we currently have another unrelated loan and credit card with RBS. Are they likely to use our reimbursement to pay towards our current loan and credit card? (both of which we have never missed repayments on).
Hi Tracey
You have nothing to worry about. The bank’s right of set off only applies if you have an account with them which is in arrears. As long as the payments on your current loan and credit card accounts are up to date and you have never been in arrears the set off rule cannot be applied. As such RBS should pay you the £9000 compensation as agreed and you can then decide what you want to do with it.
If I claim for PPI on old NatWest loans, will the payment be used to offset my current personal loan with them even though I’ve not missed any payments so the agreement is not in arrears?
Hi Steve
As long as the payments on your current loan are up to date and you are not in arrears then you have nothing to worry about. If your PPI claims are successful NatWest will send you a cheque and you will be able to do what ever you like with the money.
Hello James,
I wonder if you could help, please?
We left the UK in 2002 to move to Spain. At the time, we had a debt management plan in place with the CCCS, which had been in place for about a year, and which we were told we could keep up repayments on from Spain.
However, once we arrived there, contrary to what we had originally been advised, the CCCS told us they couldn’t deal with us any more, because we were no longer in the UK. (I’m not criticising them – they were fabulous when we got into financial trouble, and very helpful).
Anyway, once the CCCS were out of the picture, our creditors forgot about the DMP, wouldn’t entertain the reduced payments we’d been making, and began asking for the debts to be settled in full, which we couldn’t do. They continued to correspond with us, and we continued to reply, telling them we were unable to repay the total debts.
We eventually stopped making payments completely, and all communication stopped. That was sixteen years ago.
I’ve resisted the constant TV advertising about PPI claims, but I’d be lying if I said I wasn’t curious as to where we stand in our situation. Obviously, the debts were not paid in full, but as it was so long ago, I wondered if you could advise as to whether we would be likely to be awarded anything and, if so, would it go to pay off the debts, do you think?
I should say, I wouldn’t mind at all if any monies awarded went towards paying off the debts (if they still exist) but what I don’t want to do is to stir up a very unwanted hornets nest.
Thank you for any advice, and thank you for taking the time to mainain this blog, which is very useful.
Hi Deborah
Given that you stopped making payments towards these debts 16 years ago I think you can be almost certain that they are now statute barred. In other words the creditors can no longer legally enforce their repayment.
Nevertheless despite being statute barred the debts do still exist. You can therefore be sure that if you do launch PPI claims any compensation awarded would simply be held back by the banks under the set off rules. You would not benefit in any way.
Given this my view (which is always the same in these situations) is you are best not bothering with claims and letting sleeping dogs lie.