Britain's markets watchdog will consider imposing a deadline on customers claiming compensation for the mis-selling of loan insurance, potentially drawing a line under the country's costliest consumer finance scandal.

The Financial Conduct Authority (FCA) said it is to collect evidence on whether consumers mis-sold payment protection insurance (PPI) were being compensated properly and use it to assess whether the current approach was working.

Lenders have so far paid out £17.3 billion in compensation and expect the total bill to rise further.

The insurance policies 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.

Banks have pushed in the past for a 'time-bar' to be placed on claims but their lobbying failed because the regulator insisted that they needed to prove such a move would be in the interests of consumers, industry sources said.

The FCA said it would use its findings, due to be published in the summer, to assess if the current approach to compensating customers was 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," it said in a statement.

The FCA board decided on Thursday to review how compensation was 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 per cent 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 earlier this week that the number of complaints about loan insurance fell in the fourth quarter of 2014, but were still running at around 4,000 a week.

Consumer group Which? welcomed the FCA's intervention.

"People shouldn't be forced to take their complaint to the Financial Ombudsman, or use unscrupulous claims management companies," said executive director Richard Lloyd.