Lloyds Banking Group will refund around 600,000 customers over failures in its handling of mortgage arrears policies, sources have confirmed.
It is understood the bank will repay nearly £300 million as part of the scheme and its administration could cost a further £50 million.
Some customers were mistakenly charged between 2009 and 2016 because of the way Lloyds applied policies relating to financial difficulty assessments, Sky News reported.
The broadcaster said those affected would be contacted by the bank and will receive an average of £350 in repaid fees and interest.
The Financial Conduct Authority (FCA) declined to comment on reports that it had been consulted on the bank's repayment plan.
Further details of the scheme are expected to be released along with Lloyd's half-year results on Thursday.
A spokeswoman for Lloyds Banking Group declined to comment.
The repayment scheme is the latest in a series of problems to hit Lloyds Banking Group.
In March it forked out an extra £350 million to cover mis-sold payment protection insurance (PPI) claims - bringing its total bill for the scandal to £17.3 billion.
The bank, which rescued HBOS at the height of the financial crisis, has also set aside £100 million for victims of the fraud at the hands of HBOS Reading staff between 2003 and 2007.
The corrupt financiers were jailed earlier this year for the £245 million loans scam which destroyed several businesses, before they squandered the profits on high-end prostitutes and luxury holidays.
Former Deal Or No Deal host Noel Edmonds, one of those affected by the fraud, said on Tuesday that he had increased his compensation claim against Lloyds to £300 million.