Nearly 6,000 bogus payment protection insurance (PPI) compensation claims were made to the ombudsman last year, figures showed today.
The Financial Ombudsman Service (FOS) settled a record 222,333 disputes generally during the financial year 2011/12, of which 2.5 per cent or 5,667 cases were found to be "frivolous and vexatious".
Some 99 per cent of these unfounded cases involved complaints about mis-sold PPI, where it emerged that no such policy had actually been sold, the FOS said.
Only 0.9 per cent of complaints generally made to the FOS, or just over 1,000 cases, were found to be "frivolous" in the previous financial year.
PPI was sold along with loans and credit cards to cover illness and unemployment, but a widespread mis-selling scandal emerged and around £9 billion is being paid back to consumers.
Claims management companies, which typically take around a quarter of any payout to consumers, have been accused of exploiting the widely-publicised compensation drive.
Consumer groups and the ombudsman have emphasised that people are just as likely as a claims management company to be successful in making a claim if they initiate it themselves.
The FOS said that the increased number of bogus cases reflects the record number of PPI complaints received by the ombudsman last year.
It received 157,716 complaints about PPI in the financial year 2011/2012, the highest number of complaints it has ever received in a single year about a financial product. This figure also accounted for nearly two thirds of disputes.
Just under seven out of 10 PPI claims that ended up before the ombudsman were initiated by claims management companies, down on three quarters the previous year.
Chief Financial Ombudsman Natalie Ceeney said: "I think it's perfectly understandable for people to ask their bank; 'Did I have PPI?'
"At the same time we are seeing consumers being very badly misled by claims management companies."
She added: "Some of them, at their worst, are taking upfront fees and the consumer is losing out. They never had a policy and they are worse off than if they had done nothing."
The FOS also released figures in its annual review today which showed that 64 per cent of consumers received compensation in the cases it settled last year.
The ombudsman received more than 1.2 million customer inquiries, equating to more than 5,000 each working day. One in five of these became formal disputes, amounting to a record 264,375 new cases, up by 28 per cent on the previous year.
Aside from PPI complaints, the number of investment-related complaints fell by 4 per cent and banking complaints declined by 1 per cent.
The review said that the ombudsman was continuing to see many "entrenched" disputes which could have been avoided with better communication.
It said: "We also see some businesses responding to customer concerns unhelpfully and defensively - aggravating problems that a clear, helpful and sympathetic explanation might have resolved."
Sarah Brooks, director of financial services at Consumer Focus said: "PPI continues to be a thorn in the side of this industry.
"With all that has happened, consumers shouldn't need to take their PPI claim to the ombudsman to get their money back."
Which? executive director, Richard Lloyd said: "With over £9 billion set aside for PPI redress, it's essential that barriers that prevent people getting redress are removed, and quickly."