One in three consumers who have bought warranties on household items may have been mis-sold them and could be in line for compensation, according to City watchdogs.

In a scandal which has echoes of payment protection insurance (PPI) mis-selling, the Financial Conduct Authority (FCA) has found "serious and widespread" issues with insurance policies being sold to shoppers in stores and garages.

Around 3 million consumers have been identified as having purchased potentially unnecessary or worthless policies and could now be in line for hundreds of millions of pounds a year in compensation, the watchdog said.

Sources told the Daily Telegraph that the majority of the policies believed to have been mis-sold are waranties bought from high street retailers specialising in electronics and white goods.