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Banks accused of £1bn PPI redress shortfall

Banks and credit card companies may have underpaid payment protection insurance compensation by as much as £1bn.

A BBC investigation has found some lenders are failing to correctly refund additional charges which were triggered by the premiums of the missold PPI policies.

The customers potentially affected had PPI on credit cards issued by Lloyds Banking Group, Barclays, MBNA and Capital One.

The FOS says there is no doubt that fees and charges triggered by missold PPI premiums have to be refunded to customers.

The BBC says the failure to include fees and charges in compensation calculations has resulted in “dramatic” reductions to the amounts some customers have received.

Independent consultant Cliff D’Arcy told the BBC the size of the compensation shortfall is in the region of £1bn.

He says: “It is because banks were charging very high penalty fees, very high rates of interest on borrowing and some of these claims go back decades. So it compounds and multiplies to a very big number.”

Lloyds Banking Group says: “When a customer lets us know that they may have incurred other costs because of their PPI policy, we will investigate and make an appropriate refund.”

Barclays says its previous system, which assessed month-by-month whether a PPI premium had triggered a fee, did not fully capture the cumulative effect of fees and charges.

The bank says it is introducing a new method, which “will enable us to move from a monthly to a cumulative assessment of fees”.

MBNA says it operates a monthly assessment methodology, but one that excludes most fees and charges. MBNA says its methodology has been independently reviewed and it is confident it is correct.

Capital One says: “We aim to pay redress that puts the customer back in the position they would have been in if they had not had PPI.”

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  1. If the FOS think the customers should get the charges back, why have they been refusing to accept that this has been happening??

    The FOS have had their heads buried in the sand for years (whether they were sitting down or not) over PPI. CMC’s have been telling the FOS the banks are ripping customers off in the way they are calculating redress for years and every time this falls on deaf ears or ‘we are not a checking service’ – so how is the public supposed to get justice if the very people who are supposed to be looking after them are allowing the banks to rip them off again and again.

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