PPI, Bankruptcy and Insolvency Practitioners

Payment Protection Insurance (“PPI”) is an insurance contract generally taken out when a loan, credit card or mortgage is obtained. The law states that this contract is an asset in the bankruptcy, as is the right to complain in the event it was mis-sold. Financial institutions have set aside billions to compensate individuals who were mis-sold PPI, much of which still remains unclaimed.

The FCA has introduced a deadline of 29 August 2019 for making PPI claims.

On 5 February 2019 the Official Receiver announced that the Insolvency Service was instituting checks on the entitlement of bankrupts to PPI compensation. The Official Receiver is seeking to claim outstanding PPI compensation awards available to bankruptcy estates to ensure creditors receive the benefit of these estate assets.

Deloitte LLP has been appointed to assist the Official Receiver with the submission of PPI queries to providers to establish whether any mis-sold PPI compensation is due to creditors of bankrupts’ estates. Deloitte LLP has the Official Receiver’s authority to submit queries to PPI providers and to manage responses for individuals with bankruptcy court orders dated between 1 January 2000 and 31 March 2018.

The 29 August 2019 deadline is an absolute deadline for submission of claims. All substantial financial institutions have online forms which require the following (simple) information:

• Name
• Address
• Known residential addresses

Some companies have negotiated a ‘block facility’ with the financial institutions which can speed-up the process by submitting a schedule of names to each institution.

There is no charge for making these claims to the financial institutions. However, from your perspective there will be a cost to you in having to review the files and make the individual claim. These costs may not be recoverable in the bankruptcy estate if the PPI claim is not successful and there are otherwise insufficient assets to meet your costs incurred.

Whilst some Insolvency Practitioners may not be inclined to start reviewing their old files, there is a possible argument that by failing to undertake a review, a trustee is not acting in the interests of the creditor and is potentially prejudicing the bankruptcy estate by not taking reasonable steps to collect in available assets. A trustee in bankruptcy therefore needs to weigh up the logistics of going through your back files against the risk of possible liability.

Some practical tips:

• Given the issue of potential liability, you should contact your insurer for their view of a decision on your part to not address the PPI risk.
• It is also worth looking at past correspondence / questionnaires with the Bankrupt – do they make reference to PPI claims?

With the deadline at the end of this month steps need to be taken swiftly to ensure you do not expose yourself to unnecessary liability or criticism.