British Banks Underpaid £1bn in PPI Compensation Reuters

A collection of British lenders have allegedly underpaid victims of payment protection insurance compensation by £1bn.

According to a BBC report, citing one 'expert', Lloyds Banking Group, Barclays, MBNA and Capital One customers are likely to have received less than they were entitled to, when claiming for being mis-sold PPI.

The source added that the "shortfall in compensation arises because, although these banks all refunded the premiums on their mis-sold PPI policies plus interest as regulators require, they have been failing correctly to refund additional charges which were triggered by the premiums of the mis-sold PPI policies."

Banks have so far set aside £20bn (€24bn, $33bn) to deal with the scandal since 2011 while Barclays' admin and compensation fund accounts for a fifth of this total.

Lloyds banking group (Photo: Reuters)
Lloyds is also one of the banks that have allegedly underpaid customers

The Financial Conduct Authority said a total of £14.7bn has been paid out so far

PPI was originally designed to provide loan repayment cover, should the customer fall ill, lose their job or have an accident.

However, millions of customers have now submitted complaints stating that that they never wanted or needed the policy in the first place.

Britain's Financial Ombudsman Services said over the last two months that the number of PPI complaints dropped from 266,000 from the first half of last year, but is "still depressingly high."

"Once again, we're seeing big finance trying to get away with minimal effort. If MBNA, Lloyds, Barclays and Capital One still owe customers £1bn, it's not surprising so many Brits are rejecting the arrogance of our city culture," said Charlotte Webster, Campaign Manager at Move Your Money.

"To see groups dragging their feet on compensation payments just illustrates quite how unethical and self-serving some of our biggest institutions are. Millions of people are moving away from old school finance to banks and building societies that actually care about customers, rather than bleeding them dry.

"As the cumbersome wheel of regulation slowly begins to turn, the highest growth areas of finance are now those which are most transparent, such as crowd funding. People just want to know where their money is going. You can find out more about how your bank's performing on our Ethical Scorecard."