The Financial Ombudsman Service received nearly two-and-a-half times as many complaints related to mis-sold loan insurance in the second half of 2012 than in the first half, pointing to a further rise in the bill for banks.
Banks have already set aside around 14 billion pounds to compensate customers wrongly sold payment protection insurance (PPI). The policies were supposed to protect borrowers against sickness or redundancy but were often sold to customers who didn't want or need them.
The ombudsman, which settles disputes where banks and their customers cannot reach an agreement, said on Tuesday it received just under 212,000 complaints related to the mis-selling of PPI in the second half of 2012, after 86,000 in the first half.
In an interview with Reuters on Monday, Chief Financial Ombudsman Natalie Ceeney said the number of claims against UK banks for mis-sold insurance on loans and mortgages had reached "staggering levels" and would take years to pay back.
The ombudsman has now received more than 600,000 complaints about PPI making it the most complained about financial product ever in Britain. The second highest is mortgage endowments, about which the ombudsman received 350,000 complaints.
(Reporting by Matt Scuffham; Editing by Mark Potter)