Lenders are automatically using customer’s payment protection insurance compensation to pay off their outstanding loan or credit card debts, according to This is Money.
Instead of asking customers, already deceived by the national payment protection insurance scandal, how they would like to receive their compensation, some redress is being used to pay the debt on the original loan instead of being returned in cash.
While lenders are within their rights to “set off” cash held in a customer’s name to reduce existing loans without consent or warning, critics believe, in this situation, the customers should retain the right to choose.
Industry rules are somewhat vague as to whether the customers need to have fallen behind in their repayments before having their compensation set off against their outstanding balance.
There are fears customers expecting a PPI payout may have additional, and potentially more pressing and costly, debts elsewhere with which they intended to use the compensation to cover.
A spokesman for the British Bankers Association has described the actions as fair:
“The individual bank will base its decision on the particular circumstances and the specific lending agreement.”