The FSA is tightening its grip on providers of Payment Protection Insurance as part of its ongoing investigation into the practise of selling the insurance product alongside personal loans.
The watchdog said on Tuesday that it is "escalating" its regulatory intervention on PPI sales due to the findings of its recent investigation.
The FSA said it is considering a range of actions to stem complaints in the PPI products and protect consumers, which may result in fines for providers of the insurance product.
"We are considering what regulatory powers are the most appropriate to deliver fair outcomes. Firms may wish to consider stopping selling single-premium PPI sold alongside unsecured personal loans," Managing Director of FSA's Retail Markets, Jon Pain, said in a statement.
The results of the probe found that many customers were not told the monthly and full cost of their PPI when it was sold alongside an unsecured personal loan.
Tuesday's announcement is likely to be the last update on the investigation before the FSA publishes its outcome, expected within the first quarter of 2009, said a spokesman.
In reaction to the FSA's statement, the Association of British Insurers said that the insurance product is even more crucial in the current climate.
"With increasing unemployment and indebtedness, it is essential that people protect themselves against losing their income," said Nick Starling, director of General Insurance and Health at the ABI, in a written statement.
The ABI is proposing industry guidelines to reduce the number of complaints surrounding PPI.