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 James
I had 4 separate loans from a creditor dating back to 2004. The last loan was taken out in 2008. I defaulted this back in 2010 due to a relationship break up and the creditor went bust in the same year.
I still owe on this debt but due to the company going bust I was never contacted and payments stopped. 8 years later I believe this has become a statute barred debt.
Ive recently done a ppi claim check and 1 of the 4 came back. The other 3 were referred to creditors of the company taking over as it went bust. Im guessing administrators. Out of these 3 loans 2 were paid off in full, never missed a payment. Ive not gone ahead with the outstanding one but will the other 2 be kept and put towards the 3rd account or can they not do that?
Many thanks
Hi Robert
I am afraid the set off rule applies across all outstanding loans you have with the same bank. If the last loan you took with them was not paid in full then regardless of it being statute barred it still exists.
Given this if you make PPI claims against the 2 loans that were paid any compensation due can still be held back to set off against the final loan that was not paid. As such it is likely such compensation would be kept by the administrator if the loan company has gone bust.
Hi
If I had a loan with Halifax some years ago, I got into arrears and it was then sold on to Lowell. They chased me for the money, but could not provide the original signed agreement to chase me for the money. They then set my account to 0. Would they have then passed the dept back to Halifax? Or now Halifax has sold it on, can I claim?
Hi Richard
We are not solicitors here so unfortunately I cannot give you a definitive answer. My assumption on this is if a creditor has sold a debt on they then lose the right to set off if you claim for mis sold PPI. Having said that (and as I have previously stated in responses above) I believe that Halifax may state that any PPI compensation must be passed to the new owner of the debt ( in your case Lowell). It would be then down to Lowell to pass the money to you or not.
Given that Lowell has previously been unable to prove that you owe the debt it seems to me that they should give you the money. However I would not hold my breath on it. The problem is if Halifax or Lowell refuse to pass you any compensation due your only real option would be court action against them. However this will cost money with possibly no return.
HSBC have agreed to pay me back PPI that was paid on my mortgage but they say that they will only pay it into my HSBC account which I don’t want I want it to be paid into my Lloyd’s account but they say as I have an active (in credit) account with them they have to pay it into this account and cannot pay it into my Lloyd’s account
Hi Jim
I am not sure I can offer much advice here. To avoid further delay in getting the funds I suggest you let them pay the money into your HSBC account. You can then transfer it straight into your Lloyds account yourself. That seems the simplest solution to me.