Ch 31.9A Rights of Action: Payment Protection Insurance (December 2012)





31.9A.1 Introduction

Payment Protection Insurance (PPI), sometimes called ‘loan protection’, is an insurance policy typically sold when a personal loan or some other form of personal credit is granted.  The policy is designed to provide monies to meet the repayments of the loan in the event of the unemployment (or similar) of the borrower.  There has been some concern that such policies have been sold in circumstances where the individuals to whom they were sold would not have been able to benefit from the policy.  Where, for example, they were too old to qualify or already insured, or where the policy was not properly described on sale, or where they did not realise they were buying PPI (see Part 1 paragraph 31.9A.16).

A complaint for mis-selling would normally be made to the financial institution concerned directly, followed by a complaint to the Financial Ombudsman if the initial approach was unsuccessful, and would vest in the official receiver, as trustee of a bankrupt’s estate, as it arises from the contract for insurance (see paragraph 31.9A.9).

 31.9A.2  Further information on PPI

See the FAQs for an overview of common queries relating to PPI in bankruptcy cases. The FAQs are intended to be a useful introduction to the subject, or to be used as a training tool, but should not be seen as a replacement for the more detailed advice given in the Chapter.

For further information on PPI generally, see the FSA website which has various factsheets, case studies and documents relating to PPI ->


The chapter contains the following FAQ:

FAQ – Common queries relating to PPI in bankruptcy cases


The chapter is divided into 5 parts as follows:

Part 1 – General information on PPI (paragraphs 31.9A.3 to 31.9A.23)

Part 2 – Action to be taken by the official receiver in relation to PPI (paragraphs 31.9A.24 to 31.9A.53)

Part 3 – PPI on secured borrowing (paragraphs 31.9A.54 to 31.9A.65) (amended August 2013)

Part 4 – Realising PPI on secured and unsecured borrowing (paragraphs 31.9A.66 to 31.9A.77) (amended August 2013)

Part 5 – Right of set-off (paragraphs 31.9A.78 to 31.9A.90)


In addition, information and guidance are contained in the following annexes:

Annex A – (removed August 2013)

Annex B – Questionnaire for PPI relating to secured and unsecured borrowing

Annex C – MP2 insert and guidance on how to insert text

Annex D – (removed August 2013)

Annex E – Flowchart to show the process for dealing with a PPI complaint for a policy relating to a secured or an unsecured loan


The following abbreviations are used in this chapter:

PPI – Payment Protection Insurance

FSA – Financial Services Authority

CMC – Claims Management Company


[On to Part 1 – General information on PPI]