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Claims management firms have taken almost a quarter of the £22.2bn paid out for payment protection insurance (PPI) compensation.

The said companies that handle such claims had taken between £3.8bn and £5bn from April 2011 to November 2015.

The NAO said mis-selling of financial products was still a "major problem".

It said the Financial Conduct Authority lacked evidence on whether its actions were helping to reduce mis-selling.

Amyas Morse, head of the National Audit Office, said the information that the spending watchdog had access to, such as customer complaints, did not show any clear reduction in the extent of mis-selling.

"The FCA cannot be confident that its actions are reducing the overall level of mis-selling, and it has further to go to show it is achieving value for money," he said.

Risks remain

The cost of running the FCA, the Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme came to £834m a year.

Although fines appear to have substantially reduced financial incentives for firms to mis-sell, the complexity of products, sales incentives and company cultures meant the risks remained.

Some 12 million customers have been paid compensation by banks and other financial organisations for mis-sold PPI.

Complaints to the FOS were now taking three times as long to handle as they did in 2011/12 as it struggled to deal with an unprecedented increase in its workload largely caused by PPI cases.

The service had a backlog of 40,000 cases that were still outstanding after two years that it did not expect to clear until July 2017.

No decline

The FOS received 164,347 new cases about financial products in general in the second half of 2015. That was down 6% fall on the previous six months, but PPI still accounted for 56% of new complaints.

Mr Morse said there had been no noticeable decline in the level of complaints about mis-selling upheld by the FOS in the past five years. It has found in favour of consumers in 62% of cases raised with the service since April 2013.

Although making a PPI claim through the Ombudsman was free, the NAO said that many consumers were reluctant to do so because they believed it would not achieve anything or that it was too stressful.

Four fifths of PPI complaints to the Ombudsman were made through claim management companies, the NAO said.

Its report points to a warning by the FCA that government pension reforms easing access for savers "raise risks" that "vulnerable and unsophisticated" consumers could take financial decisions that were not in their best interests.

A spokeswoman for the FCA said: "It is unlikely that mis-selling could ever be eliminated completely. Our aim is to avoid and minimise it as far as possible, create the right incentives and culture in firms and to ensure appropriate redress for consumers and regulatory penalties for poor conduct are put in place when it occurs.

"The report makes clear that the recommendations, which we are accepting, are designed to build on the FCA's current strategy and increase confidence that it is achieving its intended outcomes for consumers. Protecting consumers from the effects of mis-selling is central to what we do."