What is it?
Payment Protection Insurance, more commonly known as PPI, is a product that enables a person to insure repayment of loans, mortgages, overdrafts, credit cards and store cards, to protect against accident, sickness, involuntary unemployment, or loss of life.
What was the scandal?
In the early noughties, newspapers and consumer service organisations such as Citizens Advice raised concerns that millions of PPI policies had been mis-sold, and as a result did not pay out when people needed them to.
Pressure from the public, and politicians, resulted in the Financial Conduct Authority establishing a formal procedure to claim for compensation.
This is due to close on 29 August 2019.
How does this apply to me?
As a trustee in bankruptcy, you have a duty to maximise the amount available for creditors. This would include bringing claims for compensation, in respect of a PPI claim arising pre bankruptcy and up to the date of discharge.
Claims management companies have been proactively pursuing claims on behalf of people who may have been mis-sold PPI.
After the FCA’s formal procedure closes on 29 August 2019, the claims management companies may turn their attention to pursuing trustees in bankruptcy. They may argue that the trustees in bankruptcy would be expected to investigate whether estates were entitled to compensation, in accordance with their fiduciary duties.
What do I need to do to fulfil my duties as a Trustee in Bankruptcy?
Our advice is to actively review and consider PPI claims in closed bankruptcy cases that date back to the turn of the century, excluding any cases that are annulled by an order of the court.
The Official Receiver is following this approach, in order to claim outstanding PPI awards available in bankruptcy estate to ensure creditors receive assets owed to them.
The first step would be to review the documents provided by the bankrupt at the commencement of proceedings. They should have declared to the Official Receiver if they took out PPI pre-bankruptcy.
Whilst it may be time consuming to review historic files, obtaining compensation from PPI claims is an asset in the bankruptcy so may be a fruitful source of funds to creditors, and the estate.
As you will be aware, section 366 of the Insolvency Act affords Trustees in Bankruptcy the power to inquire into the bankrupt’s dealings and property, and this extends to contacting a provider who may have mis-sold PPI to the bankrupt.
Please contact Michael Green should you wish to discuss this further.
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