Claims management firms are being investigated by the Ministry of Justice after a surge in bogus compensation claims filed for consumers who were mis-sold personal protection insurance (PPI).
The Financial Times reports banks have made numerous complaints to the ministry, which regulates the country's growing number of claims management firms.
The report said banks are now rejecting about half of all PPI claims - after a surge in the number of complaints in recent weeks.
The majority of the cases are coming via claims management companies, many of whom advertise to newspapers, send unsolicited emails and text messages urging consumers to make a claim.
A bank executive told the FT: "It is delaying things horribly. The sheer volume of submissions is distracting us from the process of paying out on valid claims."
The report added the "high number" of invalid claims taken straight to banks contrasted with the number processed by the Financial Ombudsman Service, where about a quarter of mis-selling PPI claims were rejected.
In March, the Advertising Standards Authority (ASA) rejected a complaint that an advert for a claims management firm was misleading, after consumer bodies warned against the firms.
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