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A person thinking about IVAs and PPI

IVAs and PPI

Payment Protection Insurance (PPI) 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.

In recent years, PPI mis-selling has been brought to the surface and it is something which has been investigated…as well as heavily reported in the media! PPI mis-selling claims relate to Payment Protection Insurance that a creditor may have mis-sold you while you had an agreement with them. You may not have been aware that you were paying this insurance within your agreement. If you didn’t agree to this insurance, you have the right to claim this money back. You can also claim the money back if you weren’t properly told about the commissions that were paid to the company introducing you to the insurance product.

IVAs and Payment Protection Insurance (PPI)

When it comes to a PPI claim when you are in an Individual Voluntary Agreement (IVA), PPI compensation is not considered a windfall. In most IVA proposals, it’s actually classed as an asset, 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 which is in keeping with the arrangement’s two key purposes –

  1. to ensure that you have protection from bankruptcy or any other recovery action and;
  2. to enable creditors to receive the best possible return having regard to your circumstances.

Impact of Green Vs Wright

As you may already be aware, the treatment of compensation arising from claims for mis-sold PPI for those who are subject to an Individual Voluntary Arrangement has been the subject of significant regulatory consideration, with our regulator (the Insolvency Practitioners’ Association) issuing its guidance in 2017 following the court ruling in the Green Vs Wright case.

The decision in Green Vs Wright explains that the former Supervisor of a completed IVA is still entitled to recover PPI refunds for the benefit of IVA creditors. The ruling confirms that the mere issuing of the Completion Certificate will not itself, unless otherwise stated, terminate any trust over the arrangement assets. Therefore, in the absence of a specific provision regarding the trust over arrangement assets, the trust will continue even if your IVA has finished and PPI redress should be paid to your former Supervisor.

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. However, the IVA proposals may still give your Supervisor the right to collect and distribute assets included in your IVA, even though your IVA is completed.

Are there any exceptions to the rule?

If your IVA is completed and you are awarded PPI compensation, it will usually go toward paying your creditors what you owe. There are a few exceptions to this;

  • If your IVA is so old that creditors have already closed your accounts, they won’t be able to receive any more funds 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 owed 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. It is possible that your Supervisor has already instructed a claims management company to look into recovery of any financial claims you may be entitled to.

It may feel a little underwhelming 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 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 queries in relation to any of the above, please do not hesitate to contact Debt Movement’s friendly team to discuss your options.

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