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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I have been told I have a PPI claim. The bank has contacted the collections agency as the loan was defaulted and told them we have money coming. We have been paying off this loan since 2004 and have not defaulted in the payment. Is it fair just to offer £1000 and keep the balance for ourselves or will the collections agency make trouble if we don’t give them it all.
Hi Dianne
Given you are paying your debt through a collections agency I assume you must have defaulted against it in the past. As such if the bank now awards you PPI compensation they are likely to hold back the whole amount and use this to off set against the balance of the debt you owe. This is the case whether you have defaulted on the payment plan you agreed with the collection agency or not.
As such it may be that you will never get your hands on this money. Where this is the case there is nothing you can do but at least the balance of the debt you owe will go down.
If the bank chooses not to off set and pays the compensation to you then you can do whatever you like with the money. You do not have to pay it to the collections agency. However an option you could consider is using it to offer a lump sum to settle the debt once and for all. Generally speaking you would need to offer 50% of the balance to get the collections agency to accept this.
In 2000 I defaulted on a loan with Paragon Finance which resulted in me getting a CCJ. That loan was finally settled in full May 2017.
I know I am entitled to claim PPI from them but have just started a DAS (obviously they are not one of the creditors). Is it worth trying to claim PPI and if successful will I be forced to use it towards my DAS?
Hi Michelle
From what you have said I understand that your Paragon debt was eventually paid in full. Given this if you now claim against them for PPI and are awarded compensation they should pay this to you in full.
Although you are in a Debt Arrangement Scheme (DAS) there is no requirement to pay any windfalls you receive into the Arrangement. As such if you get PPI compensation this will be yours to keep and to do with as you wish. Of course it would be a good idea to consider paying some or all of the money into the Arrangement to reduce its length but you do not have to.
Hi, i have numerous credit cards and loans over the past 15 years, i have always kept up payments and in some instances cleared cards totally, but have dipped back into the using credit recently as my business went into liquidation and in turn I stopped earning money.
I have missed one payment on a few cards last month for the first time ever. I also called one card (mbna) to explain my situation only – i have not missed any payments yet with them. They have put a stop on the card to stop interest accruing etc and i can make payments when I’m able to again, but once cleared the card will be closed. I haven’t even missed one payment yet on this card i was merely explaining that i might, but the card has been stopped anyway.
A few days later i received a letter saying I had PPI on this mbna card, (from a claim i made a very long time ago) I am about to claim it, but in this situation will mbna take the money? I haven’t technically defaulted or missed a payment yet, but they have on record that i am not currently earning money and have stopped the card
And on the other cards where I have missed a payment, if a PPI award is given will they take everything awarded, or just what is due to bring the account up to date? I.e. the 1 or 2 months missed payments?
thank you
Hi Hath
My advice is first of all that you absolutely should claim for the PPI. The worst that will happen is that the banks in question will refuse to pay you any compensation due. However in that case they will use it to pay down your debt so at least your balances will reduce.
In terms of whether they will pay you directly this will depend on the status of your account when the claim has been reviewed. Normally this can take 3-6 months. If the associated account is not in arrears at that time them I assume you will receive the money whether the card itself has been cancelled or not.
Do you think you will be able to get back into a job relatively quickly and so be able to maintain the payments? If not it might be worth starting to consider how you will manage the debts going forward. Please do get in touch if you want to chat your options through (0800 077 6180).