PPI claims deadline likely to be in 2018 but financial firms who mis-sold it will have to fund an £42m awareness campaign first

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The end of Payment Protection Insurance compensation claims has come a step closer today as the Financial Conduct Authority revealed 2018 as the year in which they are likely to be stopped.

Last month, the city watchdog stated that it would consult on introducing a deadline. In the paper set out this morning, it says 18 financial firms - who receive around 90 per cent of PPI complaints – would be forced to pay £42million for a campaign to make people aware of a new two-year deadline.

It comes as FCA research of nearly 15,000 shows 74 per cent of people know what PPI is, but some have not got around to claiming yet because of the 'open-ended nature', which the watchdog says has created inertia.

PPI claims: The FCA wants 18 financial firms to fund a £42m deadline awareness campaign - and is urging people who haven't complained yet not to use a claims management firm

The FCA believes that introducing a deadline – alongside a high profile campaign to highlight it – will prompt many into action.

The FCA adds it will help consumers to 'potentially get redress sooner and give some of them the opportunity to pay off costly debt.'

It comes as complaints continue to tail-off. Ombudsman data in September revealed compensation complaints were down 17 per cent in first-half of 2015.

PPI was sold relentlessly to borrowers alongside credit products pre-2009. It was meant to help repay some or all of their borrowing if they lost their income for a period - if, for example, they had an accident, became unemployed or sick.

PPI was most typically mis-sold alongside personal loans, followed by credit cards and mortgages.

Since 2007, firms have handled over 16.5million PPI complaints – with three quarters upheld. In total, more than 12million Britons have claimed back £21billion redress.

Complaints drop: The graphs above show how PPI claims have fallen since 2012. The FCA believe a deadline will spark more into action

The FCA says: 'Consumers who are unhappy about PPI should continue to complain to the firms concerned and to the Financial Ombudsman Service if they are not satisfied with the response.

'Making such complaints is free to consumers and most people should not need to use a claims management company to assist them. Consumers who intend to complain about PPI should do so as soon as possible.'

Data shows that a third of complaints are now made via claims management firms which charge a fee if they claim the cash back.

But the FCA adds that recent complainants who had taken their case directly to a firm, rather than using a CMC, often found the process simpler and more straightforward than they were expecting.

>> How to reclaim your mis-sold payment protection insurance (PPI) premiums - for free 

The paper sets out the full detail of the proposed new rules and guidance, evidence considered, reasons for proposing them and an assessment of their costs and benefits.

Those with views on the proposals set out in the consultation paper have three months to respond. Any comments or evidence have to be sent to the FCA by 26 February 2016.