* Lloyds has already set aside 11.3 bln stg for compensation
* Lloyds had warned of possible new 600 mln stg charge
* FCA considering possible deadline for complaints
By Matt Scuffham
LONDON, Feb 3 (Reuters) - Lloyds Banking Group isexpected to set aside hundreds of million pounds more tocompensate customers mis-sold loan insurance, potentially takingits overall bill for Britain's costliest consumer scandal to 12billion pounds ($18 billion).
Lloyds, which is 25 percent owned by the government, hasalready set aside 11.3 billion pounds to pay customers mis-soldpayment protection insurance (PPI), more than any other bank.The policies were meant to cover repayments if customers fellill or lost their jobs, but were often sold to people who didnot need them or would be ineligible to claim.
Lloyds took a 900 million pound PPI charge at the time ofits third-quarter results in October and warned its bill wouldrise by another 600 million if complaint levels stayed at thesame level in the fourth quarter.
Since then, complaints about PPI across the industry haveshown no sign of abating.
Data from Britain's financial regulator showed that 376million pounds was paid out by the sector as a whole in October,up 7.4 percent on the average payout in the previous threemonths.
Analyst Mike Trippitt at brokerage Numis has forecast Lloydswill take a further 500 million pound hit for PPI mis-sellingfor the fourth quarter of 2014, but industry sources toldReuters the charge could be even higher.
Lloyds is set to detail the extra charges when it reports2014 results on Feb. 27. Other banks are also likely to increasetheir provisions when they report full-year results, adding to atotal bill for the industry of about 24 billion pounds.
Barclays has so far set aside 5 billion pounds,Royal Bank of Scotland 3.3 billion and HSBC 2.5billion.
Complaints have declined since their peak in 2012 but not asfast as banks had been expecting.
Spanish bank Santander's British business set asideanother 30 million pounds for compensation on Tuesday, takingits overall bill to 846 million pounds.
Nathan Bostock, chief executive of Santander UK, said thebank had enough set aside to cover compensation for the next 17to 18 months if complaints continue at their current level.
The Financial Conduct Authority said on Friday it wouldconsider imposing a deadline on customers claiming compensation,potentially enabling banks to draw a line under the issue.
"We'll work constructively with them in terms of that reviewand we'll have to wait and see what the outcome is," Bostocksaid.
($1 = 0.6662 pounds) (Editing by David Holmes)
Lloyds (LLOY)