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London - Britain's markets watchdog will collect evidence on whether consumers mis-sold loan insurance are being compensated properly, after lenders have paid out £17.3bn already in the country's costliest financial scandal.
The policies, known as Payment Protection Insurance or PPI, were meant to protect borrowers in the event of sickness or unemployment but were often sold to those who would have been ineligible to claim.
The Financial Conduct Authority (FCA) said it would use its findings, due to be published in the summer, to assess if the current approach to compensating customers is working properly.
"The FCA will then consider whether further interventions may be appropriate, which could include a consumer communication campaign; a possible time limit on complaints; or other rule changes or guidance, or whether the continuation of the PPI scheme in its current form best meets its objectives," the FCA said in a statement on Friday.
"While this work continues, the FCA expects firms to continue to deal with PPI complaints in accordance with our requirements," the watchdog added.
The FCA board decided on Thursday to review how compensation is being paid given that lenders have been dealing with complaints for several years.
Banks such as Lloyds, Barclays, HSBC and Royal Bank of Scotland have already set aside £24bn to compensate consumers.
The FCA said that since January 2011, banks have handled over 14 million complaints over PPI and have paid compensation on more than 70% of those complaints.
Consumers who believe they were mis-sold a PPI policy should continue complaining to whoever they bought it from and to the Financial Ombudsman if they are not satisfied with the response, the FCA said.
The Financial Ombudsman said on Tuesday the number of complaints about loan insurance fell in the fourth quarter of 2014, but were still running at around 4 000 a week.
