PPI Policies and Trust Deeds

2nd September 2010

The Trust-Deed.co.uk forum has recently included a number of stories where individuals who have completed their payments have not been released from their Trust Deed due to ongoing PPI (payment protection insurance) claims.

PPI policies should protect people should their debt repayments become unaffordable for reasons such as redundancy. However, there is significant evidence that overpriced policies have been sold to people who would have little chance of ever making a successful claim.

Some reports suggest these policies were sold at profit margins of 80% or more.

The claims connected to Trust Deeds are not claims the Trust Deed forum posters have chosen to make independently. A couple of Trust Deed firms are pushing their clients into making PPI claims. Some people feel this is to maximise the dividend that can be offered to creditors. Other people feel that the Trust Deed companies may be commercially motivated by taking referral payments from the companies instructed to make the claim.

So what is the background of such claims?

A recent report in The Guardian newspaper suggests that up to three million people may become eligible for refunds of PPI policies with payouts totalling two billion pounds.

The Financial Services Authority (FSA) report that banks reject around 50% of PPI claims, though some individual banks are rejecting almost all of them. Around 30% of claims rejected go through to The Financial Ombudsman Service (FOS) to challenge the rejection. Of these, the FOS reverses the decisions in about 80% of the cases, forcing the banks to make payments to the claimant.

These statistics in themselves are stunning. It sometimes seems that UK banks cannot resist the urge to do all that they possibly can to ensure they are held in maximum contempt by the British public. Flying in the face of the common opinion on regulatory knowledge, their PPI sales procedures have been unacceptable and they are forcing their own customers to jump through procedural hoops to receive any kind of justice.

With this background it doesn’t seem unreasonable that Trustees seek to make legitimate PPI claims alongside their clients. The benefit of doing so is that the offending banks will not profit, and the return of such cash will benefit other creditors who acted more responsibly.

Or will it?

The claims companies or solicitors will be charging a fee for managing the case, which would normally be a percentage of any payout. In addition, it’s suspected that these companies are probably making a referral payment to the introducer (the Trust Deed company), which is also likely to be a percentage of any payout.

So exactly how much of a successful claim will end up with the other creditors? We don’t currently know, but are hoping one of our visitors will soon be able to shine some light on the subject.

Under Ministry of Justice rules the claims company/solicitor should be open with their client about any fees they themselves will charge and any referral payments they will make. We would like to report on just who is really benefiting, and by how much, if a reader could find out the information for us. Obviously confidentiality would be assured for the individual.

Meanwhile it would seem that many people who have met all of their commitments to their Trust Deed are being denied case closure while PPI claims rumble on. This appears to be plainly and simply wrong. Trustees have typically had three years to start and complete such claims. If they have now hit upon a new PPI claims “wheeze” late in the day, it should not disadvantage those who are entitled to expect their cases to be closed so they can now move on.

It’s clear that PPI has been mis-sold by many (most?) financial institutions, and it seems right that non-offending creditors share in the benefit of refunds which can be obtained via claims. However, the Trust Deed companies promoting/encouraging such claims have a responsibility not to delay the closure of cases where someone signed up to a Trust Deed, and no mention of a PPI claim had been made prior to their signing it.

Many people will also wonder what the banks and credit card companies will make of Trust Deed companies encouraging and promoting PPI claims. A Trustee (Insolvency Practitioner or IP) is responsible for securing a return for creditors. They rely upon creditor support to enable Trust Deeds to become protected. Time will tell if the creditors they rely upon for support will eventually take a dim view of an IP who, behind the scenes, quietly encourages financial claims to be made against them.

To keep abreast of the current situation and to see how further developments pan out, visit www.trust-deed.co.uk . We have forums and news articles just as informative as this one, so you can keep up with all the latest industry changes before you make any important decisions.

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