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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I have just won a PPI from HFC bank for £2.400. However we currently have a DMP including HSBC, which we have just been told bought HFC back in 2013. HSBC, are now saying they will use the full amount of the award to pay off the remainder of the debt we have with them. This is so unfair, and now we will have to pay fees to Allay, which we can’t afford. Can they really do this?
Hi Tanya
I am afraid that HSBC are in the right here. Given they took over HFC it is now part of the same back. As such the right of off set applies. They can therefore use the PPI you have received for your HFC loan to set off against the debt you owe them in your DMP. At the end of the day this is not all bad as the debt you owe in your DMP will go down.
In terms of the fee you of the company you use to help you make the claim in my view they should have known this would happen. They should have asked you at the beginning whether you were in a DMP and they should have made the connection between HFC and HSBC. Given this I think you should ask them to waive their fee. If they refuse threaten to escalate a complaint to the FCA (which is their regulator). You may find that they back down.
I really need some advice. I had several loans and credit cards with natwest over 15 years ago. I’ve since found out they owe me ppi. However on my last credit card and loan I defaulted payments. Defaults were on my credit file for 6 years and now removed. I’m cant remember if the debts were sold to a collection agency or not.
If I claim for ppi from all the loans and credit cards and they choose to use the off set rule would I still get the ppi due for the loans and credit cards that weren’t defaulted and paid back on time without issue? Or could they use that payment to off set the defaulted ones also even though they are completely different loans?
Hi Gordon
If you claim for PPI then any compensation you are awarded can be taken by NatWest to set off against the debts you did not pay. It does not matter that the compensation is related to debts that were paid in full and not defaulted. A creditor can use any PPI compensation to set off against any unpaid debt they are owed regardless of the reason it is paid.
Hi – I have just been awarded just over £2000 for past PPI. I have an agreed overdraft facility with my bank and always stay within the limits. Can they use my PPI to offset this overdraft without prior notice?
Hi William
If you have an agreed overdraft then although you owe money to your bank you are not in breach of any agreement with the bank. As such they will forward you the compensation you are due to do with as you wish. The bank cannot use money to off set without prior approval unless you are in breach of an agreement with them.