UK banks years away from end to mis-selling scandal - ombudsman

* Receiving 4,000 new PPI complaints each week

* Expects to resolve 250,000 PPI disputes next fiscal year

* Ombudsman to take on 200 new staff

LONDON, Jan 6 (Reuters) - Britain's banks will be paying outcompensation to customers mis-sold loan insurance for years tocome, having already set aside 24 billion pounds ($36.5 billion)to deal with the issue, the chief financial ombudsman said.

The Financial Ombudsman Service, which steps in when banksand their customers can't reach an agreement, said it expectedto settle 250,000 disputes about the mis-selling of paymentprotection insurance (PPI) in the next financial year.

PPI policies were meant to protect borrowers in the event ofsickness or unemployment but were often sold to those who wouldhave been ineligible to claim and the resulting compensationbill has made it Britain's costliest ever consumer scandal.

The ombudsman said it was continuing to receive around 4,000complaints about PPI each week, although that is down from apeak of 12,000 cases a week in late 2012.

"Complaints about PPI are still the main driver of financialdisputes. And although numbers are slowly declining, it will beyears before we can truly say this mis-selling scandal is over,"Chief Ombudsman Caroline Wayman said on Tuesday.

Lloyds Banking Group has set aside 11.3 billionpounds for compensation, more than any other bank. Barclays, Royal Bank of Scotland and HSBC havealso set aside billions of pounds.

In its proposed plan and budget for the 2015/16 financialyear, the ombudsman said it would take on 200 new staff to dealwith new complaints relating to PPI and other matters.

The ombudsman, which is funded by the financial servicesindustry, said it planned to freeze case fees paid by businessesand reduce its cost to the industry by 13 percent.

($1 = 0.6568 pounds) (Reporting by Matt Scuffham; Editing by Mark Potter)