Tens of millions of pounds of mis-sold payment protection insurance is going to claims management companies needlessly, the Financial Ombudsman has warned.

It has revealed that in 2011/12 about £50 million of the PPI compensation awarded by the ombudsman this year will go to those claiming on behalf of consumers.

People taking out loans, mortgages and credit cards were encouraged to pay for PPI to cover repayments if they lost their job or were too ill to work. Banks finally agreed to refund victims of mis-selling last year.

Chief Ombudsman Natalie Ceeney is now urging people to fill out simple claim forms themselves.

“We have always emphasised that there is no need to pay a third party to make a complaint. Why pay someone else to do it for you when you’re just as likely to win by doing it yourself,” she said.

The Ombudsman is a free service set up by law with the power to sort out complaints between consumers and financial businesses.

Bradford East MP David Ward, who had highlighted the PPI issue before, said: “I am very concerned about this development and I met the Financial Ombudsman only last week to discuss what action is being taking.

“The claims management companies are taking a huge cut of victims’ compensation for a job that an untrained person can do in a few minutes”, said Mr Ward (Lib Dem).

“And the easy money that claims management companies are making out of this allows them to aggressively market their services. Most people will have received a letter or a text message pushing them to put in a claim.

“It is very important that people understand that the claims process is very straightforward and you shouldn’t need help to complete it. There are guides and template letters available for free on the internet that will help you with the process.”

The Ombudsman said that in this financial year it expected to receive in excess of 165,000 PPI complaints.

“If complaints brought by claim management companies remain at the same level, £80 million of the PPI compensation we award will go to them instead of consumers,” the spokesman said.

“Eight out of ten PPI complaints last year were brought by claims management companies, though as people become more aware through the media they don’t need to use a third party, we are starting to see this figure reduce.”

The majority of PPI complaints received relate to PPI sold by banks, attached to loans and credit cards and the Ombudsman service is upholding around three out of four cases in the consumer’s favour, telling the business to pay compensation.

Anyone who is not sure about how to go about making a complaint should call the Financial Ombudsman’s helpline on 0300 123 9 123.