It has recently emerged that banks and insurance companies could be liable to pay over 4bn to customers who were fooled into paying for Payment Protection Insurance on a loan, mortgage or credit. A previous estimate of up to 1.2bn only covered customers who will attempt to reclaim the payments they have made but this new figure takes into consideration the extra amount of customers who the banks will be forced to give refunds to.

A huge number of overpriced policies were sold to customers who had no hope of claiming if they needed to. Policies were sold to pensioners, the self-employed and those with long term medical conditions who, by definition, were ineligible for cover.

The Financial Service Authority estimates that insurance brokers may have to pay up to 450m and the rest being paid by a variety of PPI providers such as banks and insurance companies. The average amount repayable to people who purchased single policies is 2000 and being such a large chunk of money it has attracted a lot of attention.

A variety of high street banks have already been slapped with fines from the FSA as they attempt to make examples as well as forcing them to offer refunds to all of the qualified customers. High street insurance broker 'The Swinton Group' have been fined 770,000 for severe failings and were made to offer a refund to over 350,000 customers while banking giants Alliance & Leicester have been fined 7m.

The future sale of policies will be regulated and controlled in a move which is strongly opposed by finance giants. The FSA intends to put a stop to companies pressuring customers into buying useless policies. Adam Phillips, Chairman for the Financial Services Consumer Panel, says "for too long banks have regarded PPI as an easy product to sell and make money without considering whether it is really right for the customer