A reader, Mr G, asks:
Due to my personal circumstances, I was unable to repay my credit card and a personal loan to HSBC. My last payment and last contact with HSBC was ten years ago in 2008. Recently I have received a letter from Robinson Way, stating they have taken over my debts and I need to arrange repayment for a total of £2,900.
My HSBC loan had the PPI that was sold to me for around £700. I would like to clear my debt now, but not sure where to start.
Should I make the PPI claim first with the HSBC and then contact Robinson Way? Or tell them now that HSBC has sold my debt to them with the PPI, meaning they have sold an account to them with an incorrect amount as the PPI has to be excluded from the amount?
That isn’t a short question to answer because Mr G also has another possible choice – do nothing because his debts are statute barred.
I’ll also look at what might apply if your debts aren’t statute barred. And give a summary of when you should reclaim PPI on old debts.
Mr G’s debts are probably “statute barred”
A creditor only has a certain length of time to take action about an old debt. For most debts, including loans and credit cards, that is six years in England.
Mr G says he hasn’t contacted HSBC or made a payment to either of these old debts for ten years – if that is right both debts are now statute barred and the creditor can’t get a CCJ for the debts any more.
His debts still legally exist, but they can’t be enforced, so Mr G can write to the debt collector and tell them he will not be paying as the debts are statute barred. See Statute Barred Debt – some common questions which has a template letter he can use.
Mr G wants to pay the debts. He can do this if he wants, it is his choice, but there is no legal reason why he has to. So he doesn’t have to make a payment arrangement with the debt collector at all.
Claim PPI on statute-barred debt?
Mr G could still claim a PPI refund on these old debts even though they are statute barred.
The good news is that if he does this, it won’t “reset the 6 year clock” and mean he has to start paying the debts. Once a debt becomes statute barred it will always remain so.
The bad news is that any refund may well be used to decrease the debts. Which if he isn’t going to be paying them is pretty pointless unless the refund will be larger than the amount owed. On the figures Mt G mentions that seems unlikley unless he was also paying PPI on the credit card and had paid that for a long while.
If Mr G does want to reclaim PPI, he should not use a claims firm to do this. If he does, the refund may just reduce debts he wasn’t going to pay but he will then owe the claims company its high fees without having gained anything. Instead, he can use the free Resolver PPI reclaim service.
What if your debts aren’t statute barred?
Not all old debts are statute barred. A debt is only statute barred if there was a period of more than 6 years during which you made no payments at all and did not acknowledge the debts in writing.
For examples, here are some variations on Mr G’s situation when the old debts would not be statute barred:
- he could have made small payments to HSBC from 2010 to 2014 so the last payment is less than 6 years ago;
- he could have paid nothing until 2013 when the debts were included in a Debt Management Plan which he is still paying;
- he could have made a PPI claim in 2015 which was rejected.
With the PPI reclaim deadline coming up in August, many people may be in this situation – having old debts where money is still owed but which aren’t statute-barred and thinking about reclaiming PPI.
Here a reclaim is definitely a good idea. Even if the refund is used to reduce what you owe, that is still good. But don’t use a claims company or you may have an immediate bill for their fees and no cash to pay it with.
Which first – PPI or payment arrangement?
Mr G wanted to know whether to reclaim the PPI before talking to the new debt collector. The answer is to do both at the same time.
PPI claims are quick if they are paid out by the bank but if HSBC refuse and the PPI claim has to go to the Financial Ombudsman that could take a long while. So make an affordable payment arrangement with the debt collector now, or they are going to keep hassling you and may take you to court.
The debt collector isn’t going to care if you are reclaiming PPI or not. How do they know if you will get a refund? They won’t agree to reduce the balance before the PPI claim is resolved.
A summary of when it is worth claiming PPI on an old debt
- Debt repaid in full – YES
- Debt still owed which isn’t statute barred – YES
- Debt still owed which is statute barred (Mr G’s case). PROBABLY NOT unless refund could be larger than the balance or you want to pay the debt.
- Debt that was partially settled – PROBABLY NOT unless the refund would be larger than what was written off.
- Debt taken out before bankruptcy, IVA or DRO – these are complicated, see PPI and Insolvency for details.