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Lloyds accused of exploiting regulatory loophole to pay less PPI compensation

Lloyds Bank has been accused of exploiting a loophole in regulations to wrongly deduct from compensation and pay cheaper form of payment protection insurance (PPI) to claimants.

An investigation carried out by BBC revealed that the British banking group has saved more than £60m ($99m) since February 2013, by leveraging a regulatory loophole known as alternative redress.

The loophole requires that in some circumstances banks may assume customers would have taken out a cheaper and regular form of PPI policy.

Using this, the bank curtailed compensation by considering the cost of the cheaper insurance out of the payment they had to make to claimants.

Lloyds said in a statement, "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."