The financial watchdog on Tuesday urged consumers whose banks have informed them they may have been mis-sold payment protection insurance (PPI) to pursue the matter, saying they had three years to lodge a complaint.
The move is designed to ensure that as many victims of PPI mis-selling as possible are compensated, the Financial Services Authority said.
If you receive a letter, it's important to consider your PPI purchase carefully and if you feel you have been a victim of poor practice, please do respond to the firm, FSA managing director Martin Wheatley said in a statement.
We think that the redress due from this process may well exceed what has been paid so far.
The FSA said banks and other lenders paid out 1.9 billion pounds last year to compensate customers who were mis-sold PPI, which covers loan repayments if the borrower loses his income.
That figure is expected to rise as banks strive to put what has become one of the industry's biggest mis-selling scandals behind them.
Lloyd's Banking Group, Britain's biggest retail lender, last year took a 3.2 billion pound charge to cover PPI-related compensation.
Many PPI policies, typically taken out alongside a personal loan, were inappropriately sold to self-employed or unemployed people, who would not have been eligible to claim.
Some lenders also sold PPI to customers without making it clear to them that they were buying the product.
Banks and other lenders are currently reviewing PPI policies on their books and alerting customers who may have been mis-sold the product, in line with FSA guidance issued in 2010.
Complaints must be lodged within six years of the initial purchase, or three years after the customer first becomes aware it may have been mis-sold, the FSA said.
Since 2005, about 16 million consumers have bought PPI policies worth 17 billion pounds, according to the FSA.
(Reporting by Myles Neligan; Editing by Alison Birrane)