If you have been paying for Payment Protection Insurance (PPI) for any of your loans or other personal credit facilities you may be eligible to make a mis-selling claim against the loan company. We consider what would happen if you do this while you are in an IVA.
Over the past few years there has been considerable discussion about the bank’s miss selling of payment protection insurance (PPI).
Although the banks have taken court action to try and minimise the number of people who can claim that they were mis-sold PPI, there have been many successful claims and compensation payments made.
If you are currently in an IVA you will no longer be making payments to your creditors or towards any payment protection insurance that you may have taken out.
However, if you had payment protection insurance and you feel that this was mis-sold to you, even though you are in an IVA, there is no reason why you should not make a claim for compensation.
If you have been mis-sold payment protection insurance, this is totally unrelated to the fact that you were subsequently unable to pay your debt and entered into an IVA.
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Compensation payments treated as windfalls
It is important to realise that if your claim for PPI mis-selling is successful while you are still in an Individual Voluntary Arrangement or while you are applying for an IVA, then any compensation payment that you receive will be classed as a windfall.
This means that the compensation will have to be paid into your IVA and will be put towards repaying the debts you owe to all of your creditors.
As such, there is a strong argument which says that there is little point in starting PPI mis-selling action while you are in an IVA. Nevertheless, recently some Insolvency Practitioners (IPs) have encouraged their clients who are in IVAs, to start PPI mis-selling claims.
They argue that people in IVAs have a duty to maximise the return to their creditors and that making a mis-selling claim will help to achieve this.
Other IPs argue that taking such action is ultimately making the position of one or more of the creditors worse while benefiting others – preferential payment in reverse. It is therefore is not in the equal interest of all creditors and should not be considered.
It should also be noted that if your Insolvency Practitioner is paid based on a percentage of the money which the IVA returns to creditors, then they also stand to benefit from a successful PPI claim. As such there is a question as to whether their encouraging you to make a claim is actually self motivated.
Delaying your PPI claim until after you IVA
Given that any claim payout made while your IVA is still operating would have to be paid into the arrangement, you could decide to delay making your claim until after your IVA has finished. That way you will be able to keep any payout you receive.
Alternatively given that the claim process will often take a number of months or even years, you could start a claim towards the end of your IVA in the hope that any compensation will not be decided until after your IVA is finished.
Any windfalls you get after your IVA has finished that you did not know that you would receive at the time it was in place will be yours to keep.
Inform your insolvency practitioner
Ultimately whether or not you feel that you have been mis-sold payment protection insurance and want to claim compensation for this is up to you.
There is currently no obligation on people in IVAs to make mis-selling claims. If your IP suggests that you do so, it is purely a personal choice.
If you do decide to start a claim while you are still in your IVA, you must remember that any compensation you do receive while the arrangement is still in place will have to be paid to your creditors as a windfall.
As such, you should make sure your IP knows you are making a claim so that if any compensation is paid, they can arrange for this to be paid to directly into your IVA and the payment of any claims company fees.