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Barclays has said it will pay out compensation to everyone to whom it sold payment protection insurance and who made a complaint before 20 April.

Customers will be reimbursed the total value of all premiums plus 8% interest.

The bank said the move would affect tens of thousands of customers, particularly those put on hold during a recent judicial review.

Barclays said it was the first bank to pay out PPI compensation on a "no-quibble" basis.

It said its customers had waited long enough because of the long-running judicial review, and this would allow it to clear the backlog quickly and assess new cases more quickly.

"We can confirm that we are contacting customers whose complaint was put on hold on or before 20 April with an offer to settle their complaint in full as a gesture of goodwill," the bank said.

Separately, the FSA has given three banks - Barclays, Lloyds, and RBS - more time to deal with their huge backlogs of complaints and a flood of new complaints.

As an indication of the scale of the problem, the Financial Ombudsman Service (FOS) revealed that since the start of April this year, it had received 40,000 new PPI complaints from people unhappy that their original complaint had been turned down by their bank.

Huge compensation

In April, the banking industry lost its High Court challenge to new rules on the sale of PPI.

These were imposed last year by the Financial Services Authority (FSA) and the FOS.

Among other things, the rules require sellers of PPI polices to review all their past sales to see if their customers have a claim for mis-selling, whether or not they have actually complained.

While the legal case was going on the banks put on hold tens of thousands of fresh PPI complaints that came in.

After losing their case, Lloyds Banking Group set aside £3.2bn to cover the cost of this compensation, followed by Barclays (£1bn), RBS (£850m) and HSBC (£269m).

Barclays now says complaints lodged before 20 April will be eligible for automatic reimbursement, while those received since then will be assessed on merit.

Which? chief executive Peter Vicary-Smith welcomed this move.

"It's fantastic to see Barclays stepping up in this way, acknowledging their mistakes and refunding customers what they're owed, no questions asked," he said.

"Hopefully this will have a domino effect and other banks will follow suit," he added.

Later, Lloyds said it would not be paying out on a "no quibble" basis.

New complaints timetable

Normally, complaints would have to be dealt with in eight weeks.

Now the FSA has decided that as a temporary measure, complaints put on hold during the judicial review must be settled by the end of August.

Fresh complaints since the end of the judicial review but received before 31 August must be dealt with in 16 weeks.

And PPI complaints received after the end of August but before the end of 2011 can be dealt with in 12 weeks.

After that, the normal eight-week timetable will apply.

Margaret Cole of the FSA said this would help firms process complaints "properly and fairly".

"Some firms are facing a huge backlog and now a surge of new complaints, which has created a bottleneck," she said.

"It is not in the interests of consumers to receive further poor handling of their complaints as a result."