The FSA will challenge the British Bankers' Association's judicial review of its new PPI complaints handling measures.
The regulator has described the package of measures outlined in policy statement 10/12 as "a sensible and fair solution for consumers and the industry alike".
In 2009/2010, 49,196 complaints were referred to the FOS regarding PPI, with 90% being upheld in the complainant's favour, while over one million complaints have been made to firms.
The FSA says: "In the interests of consumers, firms will be expected to continue handling complaints while this process is ongoing.
"If consumers are unhappy with how their complaint has been handled they may refer it to the Financial Ombudsman Service."
The FSA took on regulation of PPI in 2005 and has taken enforcement action against 24 firms for sales failings.
It has also carried out three thematic reviews, issued warnings, halted the selling of single premium PPI with unsecured personal loans and visited over 200 firms in order to improve the market.
The BBA explained why it has launched a judicial review of the new measures.
It says: "It has unfortunately been necessary to do this because there is insufficient legal clarity about what the FSA and FOS is proposing in this area.
"Everyone's actions must be assessed on the basis of a proper understanding of the relevant law and regulation and this procedure will bring this about.
"No one wants to go to court but the law needs to be clear. We hope to get this resolved as quickly as possible."
In the 10/12 policy statement, the FSA says: "All our interventions in PPI, whether addressing past mis-selling and unfair post-sale behaviour, or securing improved sales practices, reflect the strategic importance we attach to retail conduct and the principle of Treating Customers Fairly."
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