Individual Voluntary Arrangment (IVA)
In the UK, individuals may opt for an individual voluntary arrangement, or IVA, as an alternative to bankruptcy. In an IVA, the individual essentially enters into a contractual agreement with his or her creditors to be pay back any outstanding debts, with the exact circumstances being flexible based on the debtor’s income, capital, and other payments.
Payment Protection Insurance (PPI)
Payment protection insurance is a specific type of insurance that guards against failure to repay a loan or other credit, usually in the event of the policy holder losing their job, being injured, or otherwise subject to some circumstance that impacts their ability to repay the loan. Unlike most other kinds of insurance, the policy holder does not usually receive the money after a claim is accepted: it is instead paid to the creditor.
PPI Claim in IVA
It makes since, then, when confusion arises between an existing PPI policy and an individual who has entered into an IVA. Complicating the issue is a ruling by UK courts in 2011 into PPI that was improperly sold for a period of decades by a very large proportion of UK banks and other credit institutions offering it – PPI tended to be rolled into a loan without the borrower’s knowledge, forced onto a customer whose circumstances would almost never lead to a successful claim of PPI, or otherwise misled into purchasing a policy without all the relevant information about that policy being disclosed.
Because of this ruling, a substantial sum was set aside by the British Bankers Association and other industry players to settle disputes about m mis-sold PPI; those who receive a ruling in their favor may be subject to reclaiming of the amount spent on the insurance.
Regardless of the source of the PPI-related funds – be it from a proper claim being paid out or a reclaiming of PPI shown to be mis-sold – the core question regarding its relation to an individual voluntary agreement is whether the amount constitutes an asset or a windfall. An asset, such as a car or a home, is considered when computing repayment in an IVA, since it can help to pay off your debts. A windfall is anything of value that you were not entitled to at the outset of the IVA; usually this includes prizes such as lottery wins, unexpected inheritances, and similar inflows of cash.
While the exact circumstances differ from IVA to IVA, most of the time, debtors are allowed to keep a windfall as long as it does not exceed £500 (notably, this does not mean that a debtor can keep the first £500 of a larger windfall). Assets are not subject to the same protection.
Several questions and disputes on the matter have made it known that PPI income is always considered an asset. For that reason, it must all be considered within the terms of the IVA and can be used to repay creditors. For that reason, it is vital that you inform your Insolvency Practitioner when receiving any payments related to PPI – keeping in mind that the obligations of the PPI are to maximize returns to the creditor whenever possible, not maximizing the amount the borrower gets to keep.
If you believe you were mis-sold PPI and so may be entitled to a settlement or restitution of some kind, there are two main courses of action you can take. The simplest is through use of a claims management company. In light of the PPI mis-selling scandal and the establishment of funds to pay settlements on claims of improperly handled insurance, a large number of claims management companies sprang up to help consumers determine if they could receive a portion or the entirety of the amount spent on PPI back, and to aid with the legal side of collecting such repayments.
Most of the time, these companies will retain between 30% and 40% of the total amount of the claim as payment; so if £1000 is returned, the claims management company will keep £300 to £400, and the balance is moved into the IVA to repay creditors. This relatively steep cost is offset by the lack of work the debtor has to do on their own, and the fact that the firm is better equipped to deal with the legal situation about the Right of Set Off, wherein compensation is applied to the outstanding debt rather than introduced to the IVA.
It is strongly advised you do not begin this process without first speaking to your Insolvency Practitioner about the situation and your plans. Since the borrower is usually in debt to the same company the PPI award is supposed to be coming from, it is not unknown for these companies to apply the full balance of the award to the outstanding debt. The claims management company will then attempt to collect the fees from the debtor even though the debtor never received any additional cash with which to pay those fees. Your Insolvency Practitioner should protect you from these types of situations, ensuring that the fee is collected from the amount awarded, even if the debtor never sees that money him- or herself.
The other alternative is to go through the claims process on your own, without the aid of a claims management company. Even though you are not going through another company, you are still obligated to keep your IP informed of your progress regarding the matter. While there is additional work involved in this process, a number of resources exist to help guide you through how to reclaim mis-sold PPI on your own. The main benefit here is, of course, the fact that you don’t have to pay the fees of up to 40% of your total reward.
It is very important to note that the only way compensation awarded due to mis-sold PPI will directly benefit the debtor is if the amount awarded is sufficient to cover the remaining obligations established under the IVA. In this event, any leftovers will be allowed to be kept.
PPI Claims News
PPI Claims are falling according to regulator
Complaints about PPI Claims have fallen for the first time in three years according to the Financial Conduct Authority (FCA). In the 1st half of 2013 1.8 million PPI complaints were recieved compared to 2.2 million PPI complaints recieved in the previous 6 month.
However reports like these need to be questioned based on figures reported previously from the FCA within the 1st half of the year.
PPI Complaints to Cost the Banks an extra £400m in fees to FOS
Banks in the UK are set to be charges an extra £400m in fees by the Financial Ombudsman service (FOS) for dealing with PPI complaints. The FOS charges a standard fee of £550,00 per complaint regardless of whether the complaint is upheld against the financial insitution or not.
Our Successful PPI Claims featured on BBC1 – Ripoff Britain
Ripoff Britain on BBC1 with Gloria Hunniford, investigates mis sold PPI and one of our succesful clients, Steve White, discusses his PPI Claim.
We have provided a transcribed version of the Clip below
Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim
Latest posts by Tim Capper (see all)
- PPI Claims Currently Show No Sign of Slowing Down - December 10, 2014
- Swaps (IRHP) Determining the Level of Redress - November 3, 2014
- FCA updates PPI redress for 2.5 million old PPI complaints - October 27, 2014