The FSA is telling any firm selling single premium payment protection insurance (PPI) alongside an unsecured personal loan to withdraw the product "as soon as possible".
It says it remains concerned about whether consumers are being treated fairly in the sales process and has set a 29 May deadline.
The move comes just a month after a number of major UK banks, including Lloyds Banking Group and RBS, agreed to pull their single premium products.
"We recognise the severity of the current economic climate and the financial problems many consumers are facing," the letter, from FSA managing director of retail markets Jon Pain, reads.
"Moreover, we believe that PPI can play an important and legitimate role to cover repayments on specific credit agreements for consumers facing job loss, or other issues at this difficult time.
"However, our focus remains on how this product has been, and continues to be, sold and whether consumers have been treated fairly during the sales process."
A Competition Commission report on PPI sales, issued in January, suggests the prohibition of single premium policies from 1 October 2010.
The FSA's letter asks for a written response to the request to be sent to the regulator by 31 March.IFAonline
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