In its reviews of firms selling the policies that are meant to offer protection on loan repayments, the authority said that information was often unclear and PPI was even sold when it was of no benefit to the holder.
“The bottom line is that customers should come away from the sale having been given the best possible chance of understanding that PPI is optional, what the policy will and will not cover and how much it costs,” said FSA managing director of retail markets, Clive Briault.
“On the strength of our findings, the industry has further to go to demonstrate that customers really are being treated fairly in this market.”
PPI has been under fire from a number of organisations, with the Office of Fair Trading saying this week that policies tend to offer a “poor deal”.
With claims of mis-selling, consumers are likely to be adding to debt by taking on unnecessary or “poor deal” PPI policies and may wish to take out debt advice on how best to manage their finances.