Claiming for mis sold PPI during a DMP
If you are currently in a Debt Management Plan (DMP) there is nothing to stop you from making a claim for mis sold PPI. However it is important that you understand what will happen if any of your claims are upheld and you are awarded compensation.
Can you claim for mis sold PPI against a bank included in your Debt Management Plan?
If the bank you are claiming for mis sold PPI against is one of the creditors in your Debt Management plan then there is a significant risk that the cash you are due will not be paid to your directly. The bank may hold back the compensation you are awarded and use it to pay off the debt that you owe them.
They are perfectly within their rights to do this is because of a rule known as set off. This states that the bank is allowed to use any money they owe you through a compensation payment to first repay any debt that you owe them. In one sense the compensation you are awarded is not lost. It is used to repay the debt you owe and as a result your Plan will be completed sooner. However you will not have the option of spending the cash in whatever way you choose.
DM4U Tip: It is always sensible to claim for mis sold PPI even if you know the bank you are claiming against is part of your Debt Management Plan. If any compensation paid is used to set off against the debt you owe then at the very least your debt will be repaid faster.
What if you claim for mis sold PPI against a bank which is not involved in your Plan?
If the bank you are claiming against is not one of the creditors included in your Debt Management Plan any PPI compensation you are awarded should be paid to you in the form of a cheque or directly into your bank account. Because a DMP is an informal agreement you can make then your own decision about what to do with any compensation money you receive.
You are not under any obligation to use the compensation you have received to pay off any of your debt. You can therefore decide to spend it on what ever you want. However it would be sensible to consider using some or all of it to make settlements with your creditors and therefore pay off your Plan earlier.
Can I use a PPI claims management company while I am in a DMP?
If you want to make a mis sold PPI claim you have the option of either managing the claims process yourself or using a claims management company to help you. If you chose to use a claims management company then you must make sure that you make clear to them that you are in a Debt Management Plan before starting to use their services.
If a claims management company helps you get PPI compensation but the bank then holds back the cash you are due to offset against the debt that you owe you may then run into difficulties paying the claim management company’s fee as you will not have the cash available to do this.
DM4U Tip: If you want to use a claims management company while you are in a DMP you should agree up front with them how their fee will be paid if any of your claims are used to offset your debts. One option could be to agree to add any unpaid fees to your Plan as a new debt. What ever you agree it is important that you avoid being handed a large bill at the end of the claims process that you are not in a position to pay.
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