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
I have only 3 more payments to make on my IVA, I have recently received a letter from one of the banks that are just so happens listed as one of the companies on my IVA, I was originally told I wasn’t entitled to ppi compensation but now this letter is stating that due to a Supreme Court decision I can claim back any excessive commission they earned on the ppi , they also stated on the letter that the money would only be paid into my account, but they need the Iva company to send them confirmation that I can pursue this claim along with my Iva agreement , my question is if they will only pay it into my account then why do they need my agreement and to basically say yes I can pursue the claim??
Hi Tony
If you receive a windfall while you are in an IVA it must be paid into the arrangement. PPI compensation is a windfall. As such if you claim before you have your completion certificate any money you received will have to be paid into the Arrangement and you will not benefit at all.
Once you have finished your IVA and you have your completion certificate it might then be possible to claim for PPI and keep any compensation paid. However you will first have to get a letter from your IVA company confirming that they have no further interest in any PPI subsequently claimed and paid. This is what the bank needs to see. If your IVA company will not give you this you can still go ahead and claim but it will be 99% certain that the bank will pay any compensation to your old IVA company and not to you.
If a bank sells my debt on can they still persue me if I win a ppi claim?
Hi Robert
You are asking the same question as Tina (above). 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 purchaser is the new legal owner. Given this the bank has nothing to set off against and should pay to you any PPI compensation they now award.
Having said that I have recently heard of a bank which attempted to pay the compensation awarded to the debt purchasor. I believe that action is not legal and the money should come to you.
I defaulted on my tsb loan in 2011 but I still paid them what I was able to afford each month (much less than what the monthly loan repayment plan was). Tsb then sold my debt on to caboot. Then at Xmas I received letter from Lloyds saying they was buying the debt back and not to make any further payments.
I have now been told by lloyds that they have now written off my debt. What i would like to know is if I make a claim for PPI will they use it to pay towards the debt they have written off?
Hi Tess
If the bank has bought back the debt even though they have told you it has now been written off as far as I am aware this means they are not going to enforce it. However I believe that legally speaking it is still owed and the right of set off will apply. As such they would be within their rights to hold back any PPI compensation they owe you to set off against the original debt.
That said the only way you will find out for sure is to make a claim and see what happens. At the end of the day it would not hurt to do this. You never know you might be paid any compensation due.