Lloyds Banking Group will compensate £8m to 116,400 customers and agents, who lost an estimated £37m when Farepak, the Christmas hamper club went bankrupt in 2006.
The compensation move by the UK bank, follows accusations on Farepak’s bank HBOS, which was salvaged by Lloyds in 2008, for improper handling of investor money.
A High Court Judge Justice Peter Smith, accused HBOS of taking a "hardball approach" and suggested the bank should "seriously consider" adding to the £2m it put into a distress fund in 2006 for Farepak’s customers.
The Lloyds Banking Group said in a statement, "We are now working to ensure that this money goes directly to those customers."
"While HBOS acted legally in its dealing with the company, as the judge himself acknowledged, we are mindful that, in acquiring HBOS in 2009, the Group took on not only its legal and financial obligations, but also wider responsibilities," Lloyds added.