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.
Jump to article content:
- 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.
Arrange a call with a DMP Expert
Privacy Policy
Your information will be held in strictest confidence and used to contact you by our internal team only. We will never share your details with any third party without your permission.
What about PPI on a deceased persons account?
I have applied to MBNA on behalf of my late husband, but I have no idea if any money was owed at the time of his death. I am currently not working and only receiving a small pension due to ill health. I don’t know what to do for the best now, can anyone advise please?
I don’t remember if I had an account with them either. I hope I haven’t opened a can of worms.
Hi Jo
If this PPI complaint is upheld then MBNA will be within their rights to self off any money your late husband owed them first. If there are any funds left over after any such payments are made they would normally then contact the solicitor or executor who dealt with your late husband’s estate and forward them to them to be dealt with in accordance to the will.
Hi James
Thanks for your reply date 24.6.2019. I understand that any monies still owing to First National Finance would be deducted from any PPI payment due to me. My question is what is the ruling of historical PPI payments can Santandar be forced to payout or can they just dismiss the claim. I’ve been waiting several months for them to sort out this in house rule almost a year. I was paying quite a bit of payment protection on cash loans and store goods paying 143.00 per month for almost 6 years of this money only 74.00 was paying of my dept. I paid the original dept maybe three times over.
Hi Joyce
Unfortunately we are not solicitors here so I am unable to give you any further specific legal advice on this. At the end of the day if you have legitimate claims against Santander for historical PPI mis selling then they will have to resolve these. If you feel they are dragging their feet I suggest you take up your complaint with the Financial Ombudsman Service (FOS).
Hi James, I had a loan which I did not repay back to Barclays. It is now Statute Barred. I made a claim to Barclays for PPI before realising that this may make my debt enforceable again. I have received a cheque from Barclays and not sure whether to bank it? Would Barclays not have mentioned this and the payment they have given me deducted from the original debt? Am I in the clear or will I expect a letter shortly outlining the debt again?
Hi Craig
Given Barclays have actually sent you the cheque I can only assume you are in the clear. I am surprised that did not simply withhold the payment from you arguing the set off rule. However in your case they seem to have forgotten about / overlooked that.