Q: My father has received a refund for mis-sold PPI on a credit card for period from 2000 – 2012. They have also refunded interest he paid, as well as 8% interest on top as statutory compensation.
Is the refund of the interest he paid permissible to keep? Also the 8% interest as compensation? We still have some riba based debt that we are trying hard to pay back so is it permissible to use the 8% compensation interest towards these debts to offset against any interest we have have been charged?
الجواب حامدا ومصليا ومسلما ومنه الصدق والصواب
A: Your father may accept a refund for the amount of interest he has paid to the bank. If he receives more interest from the bank than he paid himself he cannot keep the excess for himself. If the additional riba based debt is from the same bank then the excess interest may be returned to that bank. If the additional debt is from another bank then the excess interest received cannot be given to this other bank, It must be returned to the original bank.