Lloyds Banking Group is reducing the amount of compensation it pays to claimants mis-sold payment protection policies through a legal loophole called alternative redress. The saving for Lloyds using this method is estimated at £60m. Lloyds have set aside a further £1.8 billion to use in compensations claims for mis-selling payment protection insurance. This additional fund will bring the total bill for Lloyds PPI claims to £9.8 billion. Despite this significantly increase in the Lloyds' PPI bill it is expected to return a £6.2 billion profit this year. The total PPI bill for all banks is said to be in the region of £20 billion according to the Financial Conduct Authority. 

Alternative Redress assumes that customers who were mis-sold a PPI product would have bought a cheaper regular PPI product instead. The Financial Conduct Authority states that alternative redress may be applied in specific circumstances as long as the customer is put into a position they would have been in had the they bought a regular policy. Veronica Rayner a Halifax Bank customer who obtained two loans was offered £2,300.00 in compensation however after investigation the bank was told to pay a further £1,200.00 in compensation. Lloyds have stated that 11% of its offers made in the 4th quarter of 2013 had alternative redress applied. Since less than 10% of claims are reffered to the ombudsman the large majority of alternative redress reductions are likely to go uncontested.