If you are currently in a DMP (Debt Management Plan) you may think that you are unable to make any claims for mis sold PPI (Payment Protection Insurance). In fact this is not the case. There is nothing to stop you making PPI claims against debts that you paid off before your DMP started or debts that are currently included in your plan.
However if you make claims against debts that are included in your DMP you need to understand that any compensation you are awarded may not be paid directly to you. The reason for this is something called the banking set off rule.
This rule means that a bank is allowed to use any money they owe you to pay off any accounts that you have with them that are in arrears. This can be done automatically without any agreement from you.
As such if you owe the bank money which is included in your DMP and you have a successful PPI claim against them, they are then allowed to use the compensation you are due to pay off the debt you owe them. You will only ever receive any cash directly if there is any money left over from your compensation after your debt is paid in full.
Is it worth claiming for mis sold PPI if I am in a DMP?
One of the big issues with claiming for mis sold PPI against debts which are included in your DMP is that you will not be in control of any compensation payment that you are awarded. It is likely that the bank will implement the set off rule and use any compensation you are due to reduce the debt you owe them.
This is an unfortunate situation because it means that you will not be able to decide yourself how best to use your compensation cash. It will not be available to help with other pressing expenses you may have because it will be used to pay off the debt you have with the specific bank. In addition you cannot choose which debts are to be paid off. It might be more advantageous for you if you could use the money to reduce a debt to which interest is still being added or use the money to offer lump sum settlements to different creditors. However this will not be your choice.
Despite these drawbacks it is still advantageous for you to make claims for PPI while you are in a DMP. Ultimately any compensation you get will go towards reducing your debt which means that your whole plan will be completed more quickly than if you had not made the claim at all.
How to claim for mis sold PPI while in a DMP
Generally speaking if you want to make a mis sold PPI claim you can either do this yourself or use a claims management company to help you. However there is a problem with using a claims management company if you are in a DMP.
Most claims management companies will want to charge you a fee for their services based on a percentage of the compensation they get back for you. However if you are in a DMP this proposal will not work. If you are awarded compensation which is then not paid directly to you but instead used by the bank to set off against your debt there will be nothing left from which the claims company can take their fee.
For this reason if you are in a DMP most claims management companies will not want to work with you and you will need to make any claims for compensation yourself.
BMD Tip: If you considering using a claims management company it is very important that you tell them you are in a DMP. If you do not and they start working for you but subsequently cannot get their fee because the bank uses all your compensation to offset against your debt then the claims company might issue you with a bill directly which you will then struggle to pay.
Should I use my DMP company to help me claim for PPI?
Many of the larger DMP companies offer in-house PPI claims management services for their clients. They charge for this service in the same way as a normal PPI claims company. However any fee due will normally be added as a new debt to your DMP and paid off through your ongoing monthly payments.
At first glance you might question the benefit of using this kind of service if you are going to end up with more debt added to your DMP. However if the compensation that is paid to you reduces your current DMP debts by more than the additional fee charged by your DMP company (which it should) then it is still in your interest to use this kind of service.