Over £1.9bn has already been paid out in redress but the FSA wants providers to directly contact those customers who have not already complained.

The FSA wants firms to explain to the customer why they may have been mis-sold PPI, why they are entitled to redress, what they should do now and the time limits involved. Letters must be fair, clear, free from financial jargon and not mislead the customer.

Customers have six years from when a sale was made to complain or, if later than this, three years from when they became aware they had cause for complaint. Any longer than this and the firm is no longer obliged to consider the complaint.

Martin Wheatley, FSA managing director, said: “We think that redress due from this process may well exceed what has been paid so far, and that is why we are acting now to clarify our expectations.

“By ensuring firms are clear about the problems they have identified and the potential redress due, we are aiming to prevent people running out of time if they choose to complain.”

Richard Lloyd, executive director of Which? consumer group, said: “We’ve seen some really poor examples of communication from banks to their customers. There is no excuse for making the PPI mess even worse through unclear and confusing contact with customers entitled to compensation.”