By Matt Scuffham

LONDON (Reuters) - A review by Britain's financial regulator has found serious problems in the handling of complaints about mis-sold loan insurance at two thirds of the small and medium-sized financial services companies it assessed.

The review found failings at 12 of the 18 businesses, which included smaller high street banks, building societies, credit card providers and personal loan companies, the Financial Conduct Authority (FCA) said on Wednesday.

The FCA said it disagreed with six out of ten of cases where companies had rejected claims and had concerns over the amount of money paid out in 43 percent of cases where customers were compensated. It did not name the firms.

The companies in the review have dealt with about 1 million complaints, approximately 16 percent of the industry total. They have paid out about 1.1 billion pounds ($1.8 billion) in compensation from a total industry bill of nearly 12 billion pounds in Britain's most expensive consumer scandal.

Payment protection insurance (PPI) policies were meant to protect customers in the event of sickness or unemployment but were often sold to people who were unable to claim on them.

The regulator said that it has started an enforcement investigation into one medium-sized firm and is considering whether a number of others should face action.

"We expect firms to deliver fair outcomes to PPI complainants. In our review, we found that some firms are doing this, while it is clear others still have some way to go," said Clive Adamson, the FCA's director of supervision.

The FCA also said that the amount of PPI compensation paid by all financial services firms in July was 528 million pounds, up 30 million from the previous month and the first time that more than 500 million pounds has been paid out in a single month.

The regulator is also reviewing complaints handling by larger firms, including leading high street banks, and said that it will publish those findings at a later date. ($1 = 0.6256 British pounds)

(Editing by Steve Slater and David Goodman)