PPI claims after your IVA has finished

In March 2017, the Court of Appeal decision in the Green v Wright case was published: Mr Wright’s IVA firm was allowed to collect PPI after his IVA ended, even though he hadn’t consented to this before his completion certificate was issued.

As questions about this continue to arrive, I thought it would be useful to summarise the current situation: what is clear and what is less clear.

The Court of Appeal decision

The full decision is here: Green v Wright verdict. Here are some articles on the decision by some of the lawyers that have been involved:

• Paul French’s blog: PPI claims survive completion of IVA for creditors  (he was the barrister for the IVA firm in the Appeal);
• Kathryn Maclennan’s blog: Green -v- Wright: complete does not necessarily mean complete (she was the solicitor for the debtor in the original court case).

Before you read on:

I am not a lawyer and I can’t give you advice on what you should do. When I say things like “I cannot see” or “This seems very unlikely”, I could be wrong. I am giving a layman’s opinion, hoping it will help you to consider your own situation.

If there is a large refund involved, you may want professional advice. You can go to your local Citizens Advice or a Law Centre – that would be free – or you may prefer a solicitor with experience in personal insolvency. If you decide to go to court over this, you have to consider that if you lose you may have to pay not just your own legal costs but the other side’s as well.

Common misunderstandings

Here are some points that keep cropping up which are worth emphasising:

“My PPI was for a debt that wasn’t included in my IVA as it had been repaid”

This doesn’t make a difference. You had the right to reclaim PPI at the point your IVA started and it is this right which is an “asset” of your IVA even if you didn’t realise it.

“My IVA says that it includes windfall assets received whilst IVA is open, but it is now closed”

This is a standard clause in most IVAs but it isn’t relevant to the PPI issue. PPI is not being claimed as a windfall. PPI is being claimed for your creditors because the right to make a claim was an asset you owned at the start of your IVA, this has nothing to do with the windfall clause.

“They will try to get any money I inherit – this is never going to end!”

This isn’t going to happen. An inheritance (or lottery win, or taking money from your pension etc) is treated as windfall if it happens during your IVA. But after your IVA ends the money is yours if one of these events happens. The court case doesn’t relate to windfalls at all.

“I would have been better off going bankrupt”

That may be correct. But PPI isn’t relevant to this – if you had gone bankrupt all the PPI would have gone to the Official Receiver.

“It’s not fair because this wasn’t explained to me at the start”

When your IVA started no-one had any idea that this court case would happen. You can’t blame your IVA firm for not telling you something they weren’t aware of.

“This only applies to PPI”

I would expect it to apply to other similar “refunds” eg for payday loan affordability cases, pension mis-selling etc. The principal is that you had the right to make a claim at the start of your IVA, even if you were not aware of this at the time.

The simplest cases

“My IVA hasn’t finished yet”

If your IVA is still in progress then your IVA firm has the right to collect this PPI. If you refuse to co-operate with the claims company they appoint, you could be in breach of your IVA terms by refusing a reasonable request and your IVA may be failed.

“I have made my last payment but they won’t give me my completion certificate unless I agree to them collecting the PPI afterwards”

If you don’t sign they will keep your IVA open until they are happy they have collected all the PPI, which could be years. It’s your choice, but I can’t see any options which will let you get the PPI money.

“I had to sign documents authorising them to collect PPI before I got my completion certificate”

Many people in the last few years have been asked to sign a deed of assignment saying that any PPI paid after their IVA completed should go to their IVA firm. The Court of Appeal case doesn’t change this.

In any of the above situations, the PPI is going to your IVA firm, I can’t see anything sensible you can do to stop this and there isn’t much point in you reading the rest of this article.

Mr Wright’s IVA used R3 standard terms and conditions

The Appeal Court decision was that Mr Wright’s IVA created a trust which did not end with the completion of the IVA unless there was specific wording to state it ended. This wording wasn’t in Mr Wright’s completion certificate.

The Appeal Court decision was based on the specific terms and conditions of Mr Wright’s IVA, which in his case had used the R3 standard terms.

If you aren’t sure if your IVA used these terms, ask your IVA firm or dig out your IVA documents. If you see Produced by the Association of Business Recovery Professionals this is an R3 IVA. Anything that says Consumer IVA Protocol is not an R3 IVA.

Let’s look first at the situation if you have an R3 IVA, then at how this may change if you don’t.

For people with an R3 IVA

If your IVA used the R3 terms, you should assume the Appeal court decision applies to you. It is highly unlikely that your completion certificate would have had any wording to bring the IVA trust to an end. The same argument – that specific wording is needed to end the trust – is likely to apply even if your IVA completed with a full and final settlement or failed.

Claims which haven’t yet been paid out

If a PPI complaint is upheld, it is very likely that your bank will ask the IVA firm if they should have the money, the IVA firm will say Yes (because of the Court of Appeal decision) and the bank will pay it to them. If this happens there is very unlikely to be anything you can do to challenge this.

Thinking about some possible exceptions:

• if your IVA is so old that your IVA firm can’t be located, I think the bank will eventually send you the money. See A PPI claim after an old failed IVA for details.
• If your IVA is so old the firm no longer has enough records for it to be able to distribute IVA to your creditors, it may be happy for the money to come to you. If you have an old R3 IVA you could enquire about this.
• If your creditors have been paid in full, the money should come to you. You are entitled to ask your IVA firm for an account which shows how much money has been distributed. If you are thinking you may be near the full payment point because a lot of PPI has already been reclaimed, don’t forget that a large proportion will have been taken by the claims firm and not gone to your creditors.

Will your IVA firm be trying to reopen old cases to reclaim the PPI? That is likely to depend on the firm. I have heard that some firms don’t intend to reopen these cases, but if you start the complaint, they will claim the PPI.

If your IVA firm wants to reopen your old case and asks you to sign something to allow them to reclaim the IVA, it isn’t clear that they have any sanctions against you if you refuse. If they mention the Green v Wright decision, you could ask them what will happen if you don’t sign.

You could also propose a solution in which you split any PPI reclaimed – half to you and half to the IVA firm. If your IVA firm agrees to this, you need to get it very clearly in writing. Also you do not want their claims firm making the complaint and taking a huge cut first – offer to make the complaint yourself.

PPI has already been paid to your IVA firm

There is nothing you can do about this.

PPI has already been paid to you

If you have spent the money, this is a very worrying situation. It seems unlikely that an IVA will be aggressive in this situation – who should it pursue, you or the bank who sent you the money? And if you don’t have any assets, it’s hard to see how pursuing you could produce any gain for the creditors. Don’t let yourself be pressured into doing anything silly like trying to borrow this money to hand to the IVA firm – just explain your situation.

For people with non R3 IVAs

There is no legal clarity for non-R3 IVAs. There hasn’t been a court decision on any of these cases and they can have very different terms. Some could be close to an R3 IVA in the areas that matter, but some may not be similar.

It seems unlikely this is going to change. It is hard to imagine a debtor is going to want to go to court, given the costs that Mr Wright has ended up with after losing his case.

In most respects similar points apply to those on the R3 case above, except the IVA firm itself is on less solid legal ground. You may decide that they are largely bluffing… but this still isn’t a very comfortable position for you to be in. If you feel you are being pressured unreasonably, put in a formal complaint to the firm and then to the IVA Complaints Gateway.

IVA firms may take different views.

• Some may choose not to try to reclaim PPI after a completion certificate has been issued if no deed of assignment has been signed.
• Some may try to reclaim, but it isn’t clear what possible sanctions they have if you refuse to co-operate. In 2018 and 2019 ClearDebt and Aperture have been sending out some letters that some customer feel are threatening about allowing the firms to make PPI and other financial claims for IVAs that have completed or have failed some time ago. See Aperture (previously called Grant Thornton) sending PPI letters after IVA completion for what your options are.
• If you try to reclaim PPI, it seems pretty likely that the bank may pay it to your IVA firm.
• Some firms may agree if you offer to split the PPI.
• If PPI has been paid to the debtor and spent, again it seems unlikely that the IVA firm will pursue this aggressively.

Comments

You are welcome to comment below but I cannot guess what your IVA firm will choose to do and I am not going to speculate.

After the Appeal Court verdict in March 2017 this article was re-published with  up-to-date information.