You may have heard about people claiming vast sums of money in relation to Payment Protection Insurance, or PPI. PPI is an insurance policy which, in the past, lenders regularly sold alongside credit cards and personal loans which was intended to be a safety net for the borrower. PPI was designed to cover repayments on the debt if the person lost their job or became ill and could no longer pay.
However, in recent years it has become apparent that PPI was regularly wrongly sold by lenders. People were signed up to PPI without any knowledge of it, and without needing or wanting the facility. This led to a scandal, and eventually a ruling that banks had to pay back the PPI payments made by customers, as long as the customer instigated the complaint.
Can you claim PPI?
The majority of mis-selling happened between 1990 and 2011, so if you took out a loan or credit card during this time, you may have the ability to claim your payments back. If you are still paying the insurance policy, or it has ended within the past six years, your bank is obliged to pay you back.
For insurance policies over six years old, the statute of limitations means that the banks don’t have to keep records of your policy, and therefore may dispute your claim. This doesn’t mean you shouldn’t claim though, as many people with policies of ten years old or more have successfully claimed money back.
How much will you get?
PPI claims vary, and it will depend on the amount you borrowed as well as the amount of time you were paying for PPI, how much you could get back. PPI is typically around 15 per cent of the balance of your borrowing, but can be as much as 30 per cent. As an example:
- A £5,000 borrowing over five years at five per cent will be around £95 per month.
- A £20,000 borrowing over three years at twenty per cent will be around £740 per month.
The potential to claim back a large amount of money is high, so if you think you were mis-sold PPI you should definitely start making a claim.
How does this affect the Trust Deed?
While you are in a protected Trust Deed, you can use your PPI money to pay off some of your debts. Refunds like this are treated as ‘windfalls’, in the same way an inheritance or prize money would be. You are obliged to reveal to your trustee if you suddenly come into some additional money, and to release this money to your creditors.
By using a PPI refund to pay off your debts, you may be able to shorten the term of your Trust Deed and become debt free sooner. If you have already finished your Trust Deed and want to make a PPI claim, your previous creditors would have no claim over your refund. However, this doesn’t mean you should wait until after your Trust Deed has ended to claim, as a windfall of this sort can help you to successfully complete your Trust Deed and reach a debt free lifestyle sooner.