The UK’s Lloyds Bank has been accused of exploiting a loophole in regulations to pay less compensation to PPI claimants.
The regulatory loophole, known as ‘alternative redress’, stipulates that in some circumstances banks may assume customers would have taken out a cheaper form of PPI, had they known it existed.
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This allowed Lloyds to save money by taking the cost of the cheaper insurance out of the payment they had to make to claimants.
According to the BBC Lloyds had saved more than £60m ($99m) over the past year by cutting compensation in this way.
The BBC also said that alternative redress could only be legitimately applied in 1% of cases, compared to the 11% of cases Lloyds admitted applying the regulatory measure to in Q4 2013.
The BBC contested this figure, saying analysis of a large survey of PPI offers undertaken by the Professional Financial Claims Association revealed that the figure was as high as 25% at some points.
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By GlobalDataThe practice is alleged to date back to February 2013.
Lloyds said: "The compensation that we pay to customers is determined on an individual basis and is in line with regulatory guidance.
"The overturn rates for cases relating to comparative redress are in line with other PPI cases. These cases will continue to be reviewed on an individual basis."
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