How Payment Protection Insurance (PPI) claims against estates may impact your business

The deadline has now passed for individuals to reclaim Payment Protection Insurance (PPI). If you want to find out more about the current position of PPI claims against estates, please visit our latest blog post.

On the 16^th of April 2019, the Society of Trust and Estate Practitioners (STEP) released a briefing note warning practitioners of an issue related to Payment Protection Insurance (PPI) claims against estates. If you’re involved in the administration of a deceased person’s estate, then this is an issue that you need to be aware of.

To give you some background, PPI was intended to cover repayments on loan and credit products in certain cases when individuals couldn’t make the repayments themselves. For example, if they were made redundant or couldn’t work due to an accident, illness, disability or death. It is predicted that many people who took out a mortgage, credit card or cash loan between 1990 and 2010 were mis-sold PPI.

Those who believe they were mis-sold PPI have until the 29^th of August 2019 to submit their claims for compensation. Financial institutions have set aside a substantial amount of money to cover the claims and billions of pounds remain unclaimed at present.

The Financial Conduct Authority (FCA) is encouraging people to check whether they had PPI by asking the provider of the loan or credit product. The FCA’s guidance also applies to those acting on behalf of beneficiaries of an estate. This issue may impact the Executors or Administrators of a deceased person’s estate, as well as Trustees in bankruptcy, Court of Protection appointed deputies and Supervisors of any individual voluntary arrangements.

Within the role of an Executor or Administrator, they are responsible for ensuring they maximise the value of the estate for the beneficiaries. Additionally, an Executor or Administrator is financially and legally responsible for administering the estate and can be held personally liable for any errors or misdistribution. If those administering estates don’t investigate whether the deceased had PPI, they face the risk of being held liable if anyone was to make a future claim against the estate. The STEP briefing note states:

“Claims management companies, after 29 August 2019, may change their focus to pursuing outstanding claims on behalf of beneficiaries against the fiduciaries involved. The potential argument might be that fiduciaries, and their advisers, would have been expected to investigate whether estates were entitled to compensation.”

Additionally, STEP adds that estate administration files post 1 January 2000 could be subject to a claim and suggests that “…a back-book review of cases active since 1 January 2000, mirroring the stance taken by the Official Receiver, would not appear “unreasonable”, and could reduce the potential for challenges from disappointed beneficiaries, etc.”

As this issue has not been previously identified, it has not been market practice for estate administration providers to have processes in place to check whether estates could be subject to PPI compensation. Kings Court Trust took counsel on this, as did other estate administration providers, over two years ago and took the view that this would not be an issue. The recent decision by the Official Receiver to go back on all bankruptcy cases after 2000 to check whether there was any PPI due has changed this opinion significantly. Precautions now need to be made to ensure closed and future estates do not face claims against them. Therefore, Kings Court Trust has made the decision to review all open and closed estates that may be affected. We will check whether a PPI claim could be made and redistribute any funds identified.

Additionally, within Kings Court Trust’s full estate administration service, we will now take on the responsibility of checking whether the deceased individual had PPI and submitting a claim for compensation if appropriate. On all estates up until the date prior to the 29^th August where we are logistically able to, we’ll check with the relevant financial institution and proceed with the complaint if the deceased was mis-sold PPI. You can rest assured that we always try to maximise the value of the estate for beneficiaries to protect the estate from any future claims.

Sources:

https://www.step.org/sites/default/files/Policy/PPI_Briefing_Note.pdf

https://www.fca.org.uk/ppi/ppi-explained

https://www.moneysavingexpert.com/reclaim/ppi-loan-insurance/