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.
Hi
I had a loan with welcome finance years ago.. This debt was sold to a debt collection agency.. It has been at least 10 years since the loan was taken out and after speaking to the debt collection agency they have confirmed the debt is actually statue barred and no further action. My Question is could i claim back PPI on the loan from the original creditor? Thanks
Hi Julie
There is nothing to stop you making a claim for PPI against a statute barred debt. However even though it is statute barred and unenforceable it remains outstanding. As such the bank is within their rights to hold back any PPI compensation which may be awarded and use it to offset against the debt still outstanding. As such my recommendation in these circumstances is normally that there is little point in making a claim and you are better off letting sleeping dogs lie.
Hi there,
I had an account with Lloyd’s 16yrs ago at which time they asked me to go in for a meeting and subsequently I was offered a loan and a gold account and other things which I can’t remember exactly but I ended up going with it all and got into trouble when I lost my job I got into arrears, approached an IVA company but ended up not doing it, however Lloyd’s never contacted me after that and I think is statute barred., no CCJs ever recorded against me. Then about 8 or 9 yrs later (2010 approx) I got into financial trouble again and eventually entered into an IVA(not including my old Lloyd’s debts). The IVA was completed early subject to a final settlement sum which was paid and accepted by the creditors. My completion date was in May 2016. I have the certificate and have applied for a ‘letter of no interest’ from the IVA Provider.
Is it worth me putting in a claim for PPI with either Lloyd’s or the creditors involved in the IVA?.
Thanks, John.
Hi John
If a debt is statute barred it means that it is no longer enforceable and you cannot be made to pay it. However the debt itself still exists. As such if you make a claim for PPI against this debt Lloyds would be well within their rights to hold back any compensation you are awarded to off set against the original debt you owed. Given this I would not recommend claiming against this debt in any event.
In terms of the debts that were included in your IVA as you say you first need to get a “letter fo no interest” from the IVA company who manageded your Arrangement. If they provide this to you then there is nothing to stop you making your claims against these creditors. In theory you could do this yourself. However I would still recommend using a specialist claims management company to help you to overcome any ongoing barriers that the banks may put up.
Hi. I have a situation where i had a joint loan with my mother in 2003. This loan was settled in 2005. A claim for PPI has been successful. My Mother has a payment arrangement for another debt with the same bank. Will they pay the full claim to us as the loan with the ppi has been settled.
Hi Richard
If the loan was in joint names then any PPI compensation payable should be split 50/50 between the named account holders. As such 50% of the money should be sent to you with no problem. However the bank can hold back your Mother’s 50% and use this to off set against the debt she still owes them. They are fully within their rights to use any money they owe her to pay a debt she still owes them given it is in arrears. It does not matter that the account is different to the one associated with the PPI compensation payment.