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 recently been awarded thousands by my creditor but I still need to sign that I accepted the offer and I’m a little hesitant, I defaulted payments in 2003 when I suffered a serious head injury and when I contacted my creditor they failed to even advise me of any PPI I had in place, instead I was left worried and depressed about debt while going through a medical recovery. 13 years later I’m worried that they will just use that money to pay off my debt and as they failed to provide insurance cover when I needed it, I disagree with that. Do I have any grounds for appeal if they do this?
Hi Scot
In terms of the set off rule I believe the bank can still hold back any money they now award you for PPI and use this to pay off the balance you still owe them. The debt itself is probably already statute barred. However even after this happens it is not written off. Although legal action cannot be taken against you to collect the debt still exists. As such in theory the bank can retain any compensation they now owe you and use it to set off against this old debt. As to the question about whether you can appeal against the bank if they do this unfortunately I cannot advise you. You would need to speak to your local CAB or a solicitor to get an answer on that.
Hi , random question like others if I have debts with banks store cards and black horse I was in a payment agreements till I lost my job and just stopped paying I still have the car black horse have never written or chased me however if I’m not wrong I think a few of my cards and Lloyds loan and possibly black horse loan have been sold to agencies I have received several letters referring to money owed now payable to these agencies. If I claimed ppi would I receive the funds given that these original lenders have been paid when the debts were sold and it’s up to these other companies to now chase me ?
Also is it possible to claim gap insurance bsvk and how far can I claim I was 18 cocky and stubborn strolled into a showroom n bought a car for just over 8grans I had no recorded job at the time I was cash in hand and a student yetvlssed checks to get the car no deposit was required I just wanted the keys the small print didn’t matter it was with black horse I paid extortionate extras like gap and all sorts and the total amount I was to repay was nearly 15,000 however this was all in 2007 wondered what weight it would hold on Amy claims
Hi Sammi
If your debts have been sold to debt purchasers then yes you can make PPI claims against the original loan companies and yes they should pay you any money you are owed. Given they have sold on the debt they are no longer allowed to use money they owe you to offset against their original debt as they no longer have any debt to collect against. As such if they owe you PPI compensation they should pay it to you. I would go ahead and make your claims.
In answer to your question about gap insurance I am not sure about this. You may be able to claim against the car finance company for mis selling but you would probably need to take specialist advice. I suggest you speak to a company called Claims Guide about this.
My husband and I had a loan around 10 years ago which we fell in to arrears with as he was made redundant. It was passed to a debt management company with the interest and total cost of PPI for the full term of the loan lumped on top. I successfully pursued a PPI claim with the original lender who sent a cheque to the DM company to reduce the balance. This was just for the PPI payments we had made. We are now in conversations with the debt management company to settle the balance. Our question to them (that they seem to be struggling to answer) is why are we expected to pay the balance of the loan PLUS the cost of the PPI policy when the original loan company have already admitted was wrongly sold to us? We have asked them to remove this cost before we agree to settle the balance. Are we in the right?
Hi Cheri
I would agree. PPI compensation is paid in order to put you back in the same position financially as if you had never paid for the insurance in the first place. As such the bank should now have deducted from your current balance any amount added to the original loan because of the PPI. If you believe this has not happened you need to contact the bank directly and ask them to send you a new recalculated balance. Your DM company should then use this revised balance as the basis for a settlement.