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, think2claim applied on our behalf for ppi with bank of scotland. My husband asked if we coud get cheque, they confirmed yes and it would be sent to us. On three seperate occasions my husband was advised cheque was in post and confirmed it was sent second class and my husband asked them to confirm the address it was sent to and they confirmed our address. After nearly Two wweks they then confirmed it had been offset against outstanding debt. My husband has just started new job and we are financially struggling, surely the bank can’t give you false information like this. They confirm all calls are recorded. So they will have recorded calls confirming cheques sent.
Hi Rita
The bank are within their rights to use your PPI compensation to set off against the debt you owe them. The way they have communicated with you is clearly unprofessional. However unfortunately I do not think there is very much you can do about it. I understand you are struggling but at least your overall debt with BoS has gone down. I think you should speak to think2claim who really should have warned you about the right of set off.
Nothing has been mentioned here about a DRO. The rules for a DRO are completely different to all other forms of insolvency and PPI cannot be used to offset the debt after a DRO has finished,but the FOS will try to tell you different. They are wrong,for the simple reason that a DRO debt is non existent after the one year it is operating for. It is not statute barred,but completely gone and it is for this reason that it cannot be recovered.If any company attempts to recover the cancelled debt,then they are actually breaking the law. So if you have a DRO do not ask for or accept unsolicited offers of PPI,as it is probably a scam to get your DRO cancelled.
Hi there Mick
You raise an important point about the DRO solution (Debt Relief Order). You are right when you point out that after discharge from a DRO the creditors can no longer chase the individual for the debts owed. The debts are discharged and can no longer be collected. However this does not mean that PPI compensation claimed after a DRO will be paid to the individual.
In fact the rules in this situation are the same as bankruptcy. Any compensation paid as a result of PPI which was mis sold prior to the start date of the DRO is considered an after aquired asset of the DRO (in the same was as it would be had the individual gone bankrupt). As such it must be paid directly to the Official Receiver even after the DRO is finished and discharged. As such there is really no benefit in claiming for PPI after a DRO.
To make matters increasingly complicated if such a claim was made and any compensation due turned out to be more than £1000 there is then a question as to whether this would invalidate the whole DRO. As far as I am aware there has never been a court case which has considered this question and so currently it remains unanswered. However given this uncertainty my advice is simply do not claim for PPI after you have been discharged from a DRO.
I have applied for ppi n been told I have a claim! I am with a dmp but think my debt was sold on so do I still get the payment? I’m going through a agency so will they take a payment out first before it comes to me or to dmp? How long does my claim take to sort out?
Hi there Tina,
As far as I am aware the bank cannot withhold PPI compensation to set off against a debt which has been sold. This is because they are no longer owed the money. The debt purchasor is the new legal owner. Given this the bank has nothing to set off against and should pay out the money awarded. In terms of how long it will take the bank to review the claim and pay out this will vary. It is normally between 2-3 months from the point a claim is submitted but could be quicker.