If you are in debt management, you may be worried about making a PPI claim, would you ever get any money from this? Luckily there is an extremely simple answer: Yes. This article looks at how to make the claim and answers some of the common questions people have.
How to reclaim PPI
The important point if you are in a Debt Management Plan is that you must not use a claims firm. Some refunds may not come as a cheque to you, instead they may be deducted from the money you owe. So if you still owe £3,000 on a loan that had PPI, this may be reduced to say £1,000. Good news? Yes, except that if you have used a claims management firm, you now owe them their percentage of the refund, so you have an extra debt for £500 or more that you didn’t have before. I have seen people being taken to court for a CCJ for these claims management fees – when they had never had a CCJ before at all :(
So you need to claim the PPI refunds yourself. Luckily MoneySavingExpert has a great guide explaining how to reclaim PPI, this has all the template letters you may need and goes through all the questions you may have. There is also a forum where you can ask questions anonymously if you are unsure. Reclaiming PPI isn’t difficult – If you can read this article, you are going to be able to manage your own PPI reclaim.
“I don’t think my PPI was mis-sold, I wanted it”
You may have wanted it, but did you realise about the many exclusion clauses that could have prevented you from ever claiming on it? Or that you could have got similar cover for a lot less money elsewhere? Or were you told you could only have the loan if you took the PPI as well? There are a long list of reasons why PPI may have been mis-sold even if you thought you wanted it – the MoneySavingExpert guide goes through these in detail.
It’s not “unfair” to try to get a refund in this situation. This insurance was extremely expensive and frequently didn’t pay out if people had problems, so it was very profitable for the banks. It may also have contributed significantly to your debt problems – without PPI you may have been able to repay your early debts and not got trapped into the debt consolidation spiral.
“I’ve moved a few times and I haven’t got the paperwork”
This isn’t a problem! The lenders have all been told By the Financial Conduct Authority, their regulator, to co-operate with PPI claims. They will look through their records to see what you paid, not tell you you have to prove anything. You can still reclaim PPI, even if the account was paid in full and closed.
Read this story about a man who claimed back a massive amount of PPI from several different banks when he had no paperwork at all at the start. He was in a DMP. Some of the money was set off against his debts, but the rest was paid to him and he is going to use it to make Full & Final settlement offers to his creditors. This is a great use of PPI payouts in a DMP.
“My debt has been sold on – who do I claim against?”
You claim a refund from the original lender, not the debt collector than has bought the debt. This is actually a good situation for you, as the original lender is more likely to send you a cheque rather than offset it against the debt.
If you get a cheque from the original lender, that won’t change the debt you still owe to the debt collector in your DMP. But you can use the money to make a Full & Final offer to one or more of your debts in your DMP – it doesn’t have to be used to clear the debt the PPI related to. This way getting a £800 refund of PPI could let you clear £1,500 or more of your remaining debt!
In an IVA , the Insolvency Practitioner routinely tries to reclaim PPI on all debts, even where the client is saying that they never had any PPI. They do this because they know that in many cases there was PPI. You may have applied for a “pre-approved” credit card using a form sent to you which already had the PPI box ticked. The salesman in a shop may have said “Of course you’ll want cover” and ticked the box without you realising what was involved.
All you are risking by making a PPI claim when you are in debt management is the cost of a few stamps. And the gains could be potentially large. It’s well worth trying!
UPDATE August 2016 – a time limit on PPI claims is going to be introduced, probably June 2019. This may sound a long way away, but don’t delay claiming as complaint handling may get really slow later on if a lot of people wait until the end!
UPDATE December 2016 – if you get a PPI refund and there has been tax deducted, you may be able to get some or all of this back from the taxman as the rules about “savings interest” changed this year. See Claiming PPI tax back for details.