PPI, or Payment Protection Insurance, is a product that enables you to insure repayment of loans, mortgages, overdrafts, credit cards, and store cards to protect against accident, sickness, involuntary unemployment, or loss of life.
PPI mis-selling has been brought to the surface in recent years, and has been heavily investigated and reported in the media. PPI mis-selling refers to insurance that you may not have been aware of in your agreement with your creditor. If you discover that you are paying PPI that you didn’t agree to, you have the right to claim this money back. You can also claim the money back if you weren’t properly informed about the commissions that were paid to the company that introduced you to the insurance product.
IVAs and Payment Protection Insurance (PPI)
If you make a PPI claim while you are in an Individual Voluntary Agreement (IVA), PPI compensation is not generally considered a windfall. In most IVA proposals, it’s actually classed as an asset to be included in your IVA, and this is why the full amount has to be paid into your IVA. In some circumstances, you get to keep the Statutory Interest element of the payment from your lender.
Your Insolvency Practitioner has an obligation to maximise returns to creditors, including investigating any and all assets, which includes mis-sold PPI. Any successful PPI claims paid into your IVA will enable you to pay back more of your debt, to enable creditors to receive the best possible return within the limits of your circumstances.
Impact of Green Vs Wright
There has been significant regulatory consideration around how the compensation from mis-sold PPI claims should be treated when it comes to people in Individual Voluntary Arrangements. In 2017, our regulator (the Insolvency Practitioners’ Association) issued its guidance following the court ruling in the Green Vs Wright case.
The Green Vs Wright case says that even after an IVA (Individual Voluntary Arrangement) is finished, the former Supervisor can still claim money from PPI refunds to benefit the IVA creditors. The court said that just because the Completion Certificate is given doesn’t mean that any trust over the assets of the arrangement is ended, unless stated otherwise. This means that if there’s no specific rule about the trust over the arrangement assets, it will continue even after the IVA has ended, and the PPI refund should go to your former Supervisor who will pay the monies to your IVA creditors, up to the amount of 100 pence in the pound.
What If My IVA Has Been Completed?
It is important to check your IVA proposal and terms and conditions. PPI compensation may have to be paid into your arrangement – even if it is completed – if the PPI was taken prior to your IVA starting. This may seem unfair if you’ve received a completion certificate, but the IVA proposal may give your Supervisor the right to collect and distribute assets included in your IVA, even though you’ve completed it. This is because your creditors still have a balance due to them, even though they are not legally allowed to chase you for it.
Are there any exceptions to the rule?
If your IVA is completed and you are awarded PPI compensation, it will usually go towards paying your creditors what you owe them. However, there are a few exceptions to this rule:
- If your IVA is so old that creditors have already closed your accounts, they won’t be able to receive any more funds from you, and your PPI compensation will eventually be released to you.
- If your old IVA firm can’t be located, and your details weren’t transferred to another firm, your PPI compensation will eventually be released to you.
- If your creditors have been paid in full, then the compensation (or the majority of it) should come to you. Be sure to check that the IVA payments and any fees have all been paid.
What Should I Do If I Think I Am Owed PPI Compensation While in an IVA?
If you think you might be eligible for PPI compensation, contact your Insolvency Practitioner and let them know. The deadline for making claims for mis-sold PPI has already passed, so you won’t be able to make any new claims. Your Supervisor may already have instructed a claims management company to look into the recovery of any financial claims you may be entitled to.
It might feel a little underwhelming or unfair to apply for compensation only for it to be paid directly into your IVA. But, in some cases, it can benefit your IVA or even shorten your term if your creditors can be paid in full sooner, making you financially-free earlier than expected.
It can feel as though claiming PPI compensation when in an IVA is a little complicated and sometimes overwhelming. If you have any questions about how to do it, please do not hesitate to contact Debt Movement’s friendly team to discuss your options.
