Tens of thousands of consumers will be encouraged to join a £350m lawsuit against an HSBC subsidiary over loan insurance mis-selling, in a stern test of the appetite for class action-style litigation in the UK.

Lawyers at Clyde & Co plan to bring a group claim against HFC bank after it was fined £1.1m by the Financial Services Authority for selling payment protection insurance, or PPI, policies without verifying whether customers needed the cover.