According to the Financial Ombudsman, banks, including Lloyds, Barclays and RBS, had been using a regulatory provision called “alternative redress” or “comparative redress” to reduce the amount they repay consumers claiming back PPI refunds. UK media also had their take on the development and claimed that these banks have used the provision since last year, with some even from 2012.

Alternative redress works by allowing banks to assume a consumer with a missing or uncertain PPI policy to be refunded with a regular-premium insurance repayment. However, consumers with single-premium insurance, which are more expensive, were given alternative redress. Former financial expert-now-journalist Cliff D’Arcy said that it was a “scandal out of a scandal” pertaining to mis sold PPI.

PPI is a policy designed to repay loans, mortgages and credit cards in case you get sick, an accident or become unemployed. However, because of its many exceptions, many consumers were unable to make use of the insurance policy. The average regular-premium PPI payout is £2870. Single-premiums cost more.

Observers said that this new scandal may reverse the FCA’s tallied 15% overall reduction of PPI complaints to banks in the second half of 2013.

Consumers are encouraged to look for their PPI complaint information, find if they were given alternative redress and demand a full refund from their banks. Consumers may also contact the Financial Ombudsman in case the banks do not fulfil their responsibilities.