The Financial Ombudsman Service (FOS) said it is receiving around 2,000 new complaints a day about PPI and the insurance made up 83% of its caseload in the first quarter of this financial year.
Writing in the ombudsman's newsletter, chief ombudsman Natalie Ceeney made reference to "recent media reports of serious failings in the handling of PPI complaints by a major financial institution", which was not named in the article.
Last month, Lloyds customers who had seen their PPI claims rejected were being urged by consumer campaigners to fight on for compensation after an undercover investigation into the bank found evidence of failures in processing complaints.
A journalist working for The Times was told that some bank salesmen had faked information on agreements and that complaints handlers should effectively turn a blind eye to the risk of fraud. Lloyds said at the time that it had taken immediate action and believed the comments to be "isolated".
Ms Ceeney said consumers are reacting with "anger" to reports that their complaints may have been handled badly, adding: "The job of resolving many thousands of complaints can only be more difficult when there is an atmosphere of universal suspicion and distrust. It will undoubtedly affect our ability to handle complaints as quickly and as smoothly as we would like."
The chief ombudsman said that claims managers had also been responding angrily to the concerns. Banks have blamed claims management firms, which take a chunk of any PPI payout, for slowing down the compensation process by sending them large numbers of bogus and duplicate claims.
Consumers turn to the ombudsman service to step in when they cannot come to an agreement with their financial institution. The ombudsman deals with a range of financial complaints, including those related to car, travel and home insurance and bank accounts.
However, PPI is the type of complaint most likely to be upheld by the ombudsman in the consumer's favour, with almost four-fifths (78%) of PPI complaints upheld in the first quarter of this year. Some 132,152 new PPI cases were received by the ombudsman between April and June, meaning the ombudsman is well on the way to surpassing the 378,699 PPI-related complaints it received last year.