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.
I had a credit card with Lloyds I went into default and since taken to court for repayments CCJ which I’ve been paying off monthly .
I recently claimed PPI back on that account and the claim was successful, do I still have to pay the CCJ for this account or can I appeal it after the fact seeing as Lloyds misspelling was the reason I defaulted on the account and accrued the debt ?
Do I need to contact Lloyds and ask them to withdraw the claim or go I have to go through the courts ?
Hi Patricia
This is an interesting question. I think you have a strong claim that the CCJ should never have been issued. It stands to reason that you would not have been struggling with the debt had you not been mis sold the PPI in the first place. We are not solicitors here so I cannot be certain what the outcome will be. However I do not think there is any harm in you writing to Lloyds and asking them to withdraw the CCJ. You should state that the purpose of them paying you PPI compensation was to put you back in the position you would have been in had you never been sold the PPI. Clearly overturning the CCJ must be part of that. Let us know how you get on.
Hi, I have made a claim against Barclays which has been upheld. My question is I went into default and paid back through a dmp. During this time my interest was reduced. I have now paid back all that was due. In the last 2 months of finishing the debt Barclays sold it on (didn’t really make sense at the time). Now that it is all paid will I be expected to pay for the reduced interest with any of my compensation?
Hi Nicky
As far as I am aware if the debt is paid in full I can see no reason by Barclays could withhold any PPI compensation you are now due. Notwithstanding that you subsequently paid it, the fact that the debt was sold on also confirms nothing further is owed to Barclays. You should not have a problem.
Can anyone help please? I claimed ppi on several Yorkshire and bank loans and was duly paid out with complaints upheld. The last loan is defaulted on in 2010 and Ian we sold on. I had no contact about this loan in last 71/2years neither written or verbal. Suddenly I’m being chased by debt company that loan was sold too. I have written to debt company and told them the debt is statute barred. The they wrote back and said iIwould not hear from them again but the bank are now wanting the debt back. The can they enforce it if it is statute barred a d iIhave used the money to pay off other debts?
Hi Jane
It does look to me as though the debt is statute barred. As such it can no longer be enforced. The debt purchasing company have no right to try and collect from you and it is quite right for them to have said they will not contact you again.
In terms of the original bank given they sold the debt they have no more debt to collect. It is not now their debt to enforce and they cannot take further action against you. As such if they are asking you to pay back the PPI they paid you for some reason I cannot see how they have any right to do this. Having said that we are not solicitors here so you might want to double check this with a legal representative at your local CAB.