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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Hello,
After two years of making token payments towards our debts with RBS we have finally come to an agreement that will (hopefully) conclude matters. RBS have accepted offers we have made in partial settlement of the debts. The debts will be shown as partially settled on our credit file and they will not pursue the remaining outstanding balances.
We have also been offered PPI refunds from RBS. The PPI team said they would use their right to off-set any debts we have outstanding with RBS Group. Does this mean that, even though our settlement agreement states RBS will not pursue the remaining outstanding debt, the PPI refund proceeds could still be used to off-set it?
Hi Ske
Sorry to be the bearer of bad news but I am afraid that RBS will certainly hold back any PPI compensation you are awarded and use this to off set against the debt you do not repay.
The terms of your settlement agreement with them says they will not pursue you for the remaining debt. This means that they will cease all further collection activity against you. However if the money “falls into their hands” without having to enforce collection (as would be the case with PPI compensation) they are certainly within their rights to hold it back for set off. I would be very surprised if they did not do this.
Thank you for your prompt reply James.
If using the PPI proceeds to set-off the debt leaves us in financial hardship, is it concieveable that RBS would agree to not set-off?
RBS could always use their discression to give you some or all of the money Ske. However whether they will or not I am not sure. If pressed I would say that it is unlikely but you can but try…..
I know there is questions and replys about this but im still struggling to understand it. I had numerous loans with the natwest (8 or 9 with ppi) over the years but my last one i defaulted on in dec 2008 (no ppi on this one).
I spent a year away in a HMP and when i came out my debt had been given to a debt collecting agency. I sorted out a payment plan and after 2 years i offered a settlement below what i owed. They where happy to accept .
I went through the claims guys this year and won on the loans with ppi (just sent declaration letters last week). So will the money come to me / debt collecting agent or will bank try and keep it? Claims guys want £1000 and keep ringing to see if i have been paid yet.
Hi Andy
Your situation seems very similar to that of Paul’s (posted in April 16 above). As I said then it is my belief that if your creditor agreed to accept an amount to settle a debt they cannot now argue that they are still owed money. Why? Because they wrote the outstanding amount off as part of the settlement deal.
Given this they should not be able to retain any of your PPI compensation to set off against this debt. It does not seem logical that they can set off against a debt that they are no longer owed.
However I must stress that this is my personal view. We are not solicitors here. If the bank does hold back any of your money and you want to try to argue it you would need to get legal advice.
Thank u for the reply james. There is nothing about it on my credit score plus i have the original letter from the debt collecting agency (who where a solicitors) telling me they are happy with the settlement and classed the case as closed. Its just a waiting game now hopefully with a positive outcome but knowing banks im sure there will be a sting in the tail .again thanks for the reply
Hi
In 2006 l had several credit cards and a tesco loan. I was taken ill in the October and the loan was paid by the insurance company for 12 mths, l did not make any more payments to Tesco but do know that the loan was sold on. The credit cards where never paid from oct 2006 and where also sold on. I was not able to go back to work for over 5 years. Would it be worth making a claim
Hi Pauline
As I have stated in previous responses above I believe that you can make PPI claims against an original creditor if they have already sold the debt on and they should pay any compensation due to you. However I am now hearing of cases popping up where the loan companies are saying any compensation paid should go to the new owner of the debt (the debt purchasor such as Arrow Global) and not you.
Unfortunately we are not solicitors here so I am not sure exactly how this is viewed in law and whether there is a legal precident. At the end of the day there is nothing to stop you making claims to see what happens. However it is not 100% certain the compensation will come to you.