500 complaints a week are received by The Financial Ombudsman about the insurance, which works out at around 25 percent of those who have it.

Watchdog has written to the Financial Services Authority (FSA) asking it to bring the banking and finance industry into line.

Borrowers are been overcharged by a staggering 1.4 billion pounds a year through these protection insurances, according to an official study.

Millions of people have been mis informed about PPI’s and have been conned into buying them. They have been lied to by salesmen, some have even told customers that unless they buy the insurance they will not qualify for the loan, card etc. that they want.

There are more than 14 million PPI polices in existence alongside loans, mortgages, credit cards, store cards and car finance.PPI is supposed to help if the borrower suffers a sudden loss of income through unemployment or sickness.

There are many examples though of where PPI has been sold to people who do not even qualify for cover, such as the sick, pensioners and the self employed.

What is unusual about the complaints to the ombudsman is that they are about the way they have been sold, rather than people not being able to claim. The biggest complaint being that people did not realise that they were taking out PPI and the cost of the policy was not explained to them.PPI can add thousands to the cost of the loan.

In the majority of cases borrowers are charged a one off premium which is added to the cost of the loan and attracts huge amounts of interest.

Some companies have increased premiums resulting in policies that are often more expensive than deals available from a specialist company.

The commission may possibly put a cap on PPI charges and stop the banks selling the policies alongside other products.

Consumer group Which? condemned the PPI sold with credit cards as worthless. It said few people are able to make successful claims.

Personal finance campaigner at Which? , Doug Taylor, said: Credit card PPI is a modern day snake oil it s a useless product, expensive and poorly designed.

As the credit crunch continues to take hold, people want to be protected and have peace of mind, but credit card PPI, like a house of cards, won t give you the support you need.

A number of well known firms have been fined by the FSA for mis selling PPI.

The HFC Bank, was fined 1.085 million pounds, Capital One bank, was fined 175,000 pounds, and GE Capital Bank, was fined 610,000 pounds.

The FSA said: The FSA is reviewing the position in the light of the information it has received from the ombudsman service, and the information provided by its own ongoing thematic work on PPI.

It will make a decision on possible measures to take on the basis of this review in due course.

According to The British Bankers Association (BBA) PPI is becoming an increasingly important safety net for borrowers and restricting the way it is sold could leave customers exposed, just as economic conditions are worsening .