Chapter 31.9A - PPI: FREQUENTLY ASKED QUESTIONS (FAQs)
These FAQs are intended to be a useful introduction to the subject of PPI, or to be used as a training tool, but should not be seen as a replacement for the more detailed advice given in Chapter 31.9A.
What should I do if the bankrupt cannot remember if a PPI policy has been taken out?
If the bankrupt cannot recall whether a PPI policy was purchased, the official receiver should make enquiries of any secured creditors using the MP2 mortgage letter (with appropriate text inserted see Part 2, paragraph 31.9A.30 to 32).
If the bankrupt suspects that they held a PPI policy in respect of an identified unsecured debt the questionnaire at Annex B should still be sent to the bankrupt to complete with as much information as possible, and then forwarded to the relevant financial institution for consideration.
If the bankrupt neither recalls or suspects that he/she held a PPI policy in relation to an unsecured debt, then no further enquiries should be made (see paragraph 31.9A.33).
How does the treatment of PPI policies related to secured and unsecured debts differ? (amended August 2013)
The main difference is that with a PPI policy obtained on an unsecured debt, the creditor is likely to apply the right of set-off and use the debt owed by the bankrupt to off set any compensation. See Part 5. This will mean that their claim in the proceedings is reduced rather than monies being received by the official receiver for the benefit of the estate.
A secured creditor usually has the underlying asset to claim against and is therefore less likely to have a claim in the bankruptcy and a right to apply set off.
From September 2013, The Service no longer has a contract with agents for the pursuit of PPI complaints. Official receiver’s should deal with complaints in respect of PPI policies relating to both secured and unsecured debts in-house, see Part 4.
What is the relevant date for deciding if a complaint is likely to vest in the trustee in bankruptcy?
Provided the mis-selling took place prior to the date of the bankruptcy order the complaint will vest in the official receiver as trustee in bankruptcy. See Part 1.
What do you mean by set-off?
Set-off relates to cross-claims.
Where the institution liable to pay compensation to the bankrupt (his/her trustee) holds a provable debt in the bankruptcy, the two competing claims may be set-off against each other to give a net liability/asset.
By way of example, if the financial institution is liable to pay compensation of £2,000 but holds a provable debt of £5,000, the institution’s claim is reduced by means of set-off to £3,000 (£5,000 - £2,000).
See Part 5 for more details.
The bankrupt paid off the loan/credit card before the bankruptcy, does the official receiver still have an interest in the PPI policy?
Yes. The PPI mis-selling complaint is a separate matter from the loan/credit card it was taken out to protect. Provided the mis-selling took place before the date of the bankruptcy any complaint will vest in the trustee. See Part 1, paragraph 31.9A.21 to 22.
Is the entitlement to any PPI mis-selling payment different where PPI was mis-sold in relation to a credit card instead of a loan?
No.
Where PPI has been mis-sold in relation to a credit card, the PPI policy is usually paid for monthly as a percentage of the outstanding card balance.
The date of the mis-selling of the PPI policy is the relevant date for deciding if the complaint vests in the trustee. Where the account was taken out prior to the bankruptcy order, the PPI policy will most likely also have been taken out at the same time.
The bankrupt’s spouse (or other solvent third party) paid off the loan/credit card after the bankruptcy. Does the official receiver have an interest still?
Yes. Where, post-bankruptcy, a third party repays a provable bankruptcy debt in full, perhaps under a guarantee arrangement, and subsequently a PPI complaint is accepted, it is possible that some or all of the compensation payment may be due to the third party. This would be appropriate if the loan creditor could have applied set-off at the date of the bankruptcy order (see Part 1, paragraph 31.9A.23).
What if the bankrupt or his/her partner has already made a claim under the policy and received payment from the PPI policy?
If the bankrupt or other policy holder has already made a claim on, and received payment out of, the PPI policy for loss of income (for example), this does not prove that the policy was validly sold and it is possible that a compensation payment may still be made. The official receiver should use his/her discretion on a case-by-case basis as to whether to pursue such cases beyond the initial questionnaire (see Part 1, paragraph 31.9A.17).
Where can I direct the bankrupt for further information?
The bankrupt may be directed to the PPI information on the Insolvency Service website.