UPDATE 1-UK regulator considering 2014 PPI claims deadline

* BBA proposes April 2014 PPI claims cut-off point

* FSA says considering merits of proposal

* Proposal would require full public consultation

LONDON, Jan 18 (Reuters) - Britain's financial regulator isconsidering whether to set a deadline for customers to claimcompensation for mis-sold loan insurance.

The Financial Services Authority (FSA) said on Friday it hadbeen approached by the British Banking Association, a lobbygroup, to discuss the potential for an April 2014 deadline tomake claims on payment protection insurance (PPI).

The proposal would see the banking industry fund awidespread advertising campaign to ensure customers were awareof any deadline and how to make a claim.

The FSA said its key consideration would be whether such amove meant customers ultimately received compensation morequickly.

"Our key priority is to ensure consumers are protected, sothe FSA board would need to be convinced that any proposalswould be in the interests of customers," the regulator said.

Britain's banks have already set aside 12 billion pounds($19 billion) to compensate customers wrongly sold policiesmeant to protect borrowers who lost jobs or became ill. Some inthe industry fear the bill could reach 25 billion pounds.

Banks are struggling to get to grips with a mounting backlogof complaints. Some 5,000 claims are being sent each week to thefinancial ombudsman, which deals with cases where banks andcustomers cannot reach a settlement.

The regulator said it would continue to hold discussionswith the BBA and also seek the opinions of consumer groups andother parties. Implementing the proposals would involve changingits rules and would not be possible without a full publicconsultation.

Craig Lowther founder of claims management firm,MoneyBoomerang, said: "To impose a time limit on the thousandsof people who have been let down by their lenders but who haveyet to start a claim is unfair. Some will miss out as a result".

Reuters reported earlier this week that lenders wereco-operating with some credible claims management firms to speedup the compensation process, having previously blamed them forexacerbating the scale of the problem.