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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Curiousy, if I had debt on an account and claimed PPI and that was offset by the bank against the debt as it should be, but I had used a PPI claims company who charge a fee, which I believe is something like 25%- I would then likely find myself in debt to the PPI claims company for their fee rather than them deducting it from the pay-out as they normally would?
Hi Andy
You are 100% correct. As such it is not sensible to use a claims management company to help you if you know that any compensation paid will be used to offset debt.
This is what I advise people who are currently on a debt management plan that claiming for PPI is a good idea because if successful the balances they owe their creditors
will be reduced. However they are best advised to make the claims themselves and not involve a claims company.
Hi
Not sure if you can help. I had PPI on a loan, I lost my job they didn’t pay out and so went into debt still trying to pay monthly repayment. They passed my debt over to another company surely they should now take this back as I shouldn’t have needed to pay this
Hi Julie
It sounds as though you should make a claim for mis sold PPI. If you do and are awarded compensation the bank will use the funds to off set against the debt you owe. If the compensation is great enough to pay off 100% of the outstanding amount you now owe then there will be no more debt and the collecting company will stop chasing you. If there is still some debt remaining you will still be liable for this and have to pay it. Either way your debt will be reduced.
Hi there, I’ve just made a phone call to Gladstone’s reguarding a ppi claim from around 12 years ago the debt wasn’t paid off, so I still have a claim? I took the loan out with Abbey National which I think has now been taken over by Santander. I don’t want to fill out paperwork to send back to not get any ppi. Any help with this would be appreciated
Hi Karlie
If the debt you are claiming against (or any other debt you have with the same creditor) was not paid then the set off rule will apply. It does not matter that Abbey National no longer exist. Although the debt you did not pay is now statute barred, Santander can still collect on it if funds become available.
As such I think it is highly likely that Santander will retain any PPI compensation your are awarded to repay this debt. Therefore it is probably not worth making the claim.