Banks and credit card firms excluded penalty fees and charges from calculations

Major banks and credit card companies may have under-compensated payment protection insurance (PPI) customers by as much as £1bn.

Customers with credit cards from Lloyds Banking Group, Barclays, MBNA and Capital One are among those affected.

The shortfall in compensation arose because, although the banks all refunded the premiums on their mis-sold PPI policies plus interest, they failed to include penalty fees and charges in the compensation calculations, according to a report for BBC News.

This has resulted in a dramatic reduction to the amounts some customers have received.

The Financial Ombudsman Service (FOS) has told the BBC that fees and charges triggered by mis-sold PPI premiums should be paid back.

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