Banks underpay PPI compensation by £1bn, report claims

Banks have underpaid compensation for mis-sold payment protection insurance (PPI) policies by about £1bn, according the BBC on Thursday.The customers affected had PPI on credit cards issued by Barclays, MBNA, Capital One and Lloyds Banking Group.All the banks involved have said they will make every effort to ensure the full amount of compensation is paid.The shortfall comes where a policy linked to a credit card has been refunded, but penalty fees and charges incurred on the card as a result of paying for the PPI have not been paid back. Hence, the customer has not been returned to the position they would have been in had they not bought the policy.The BBC said it was hard to determine how much compensation the banks concerned had so far avoided paying their customers because "only they have access to the detailed records required for an accurate assessment".All of the banks concerned declined to comment on how they calculate compensation and why the effect of fees and charges are not fully included as required by regulators.In a statement to the BBC, Lloyds Banking Group said: "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 confessed that is former system failed to capture the cumulative effect of fees and charges but said it had compensated customers who were affected."In the case of late and over limit fees, where it is possible to identify that fees have been triggered by the customer taking PPI, we have already repaid them and in recognition that we may not have been able to identify all fees, we have paid additional interest to more than mitigate any customer detriment," a spokesperson said.RD