Firms paid out £1.9bn in payment protection insurance redress last year, the latest figures from the FSA show.
Payments hit £441m in December 2011, the largest month yet for PPI payouts.
The Financial Ombudsman Service says it is currently receiving 1,000 new PPI complaints every day, the majority of which relate to PPI sold by banks, attached to credit cards and loans.
It is currently upholding around three out of four cases in the consumer’s favour with the average compensation £2,750.
But Which? executive director Richard Lloyd says the amount banks are paying out is not good enough and he is calling for them to speed up their payouts.
He says: “It’s good to see the PPI payout is finally starting to speed up but last year’s compensation of £1.9bn is less than a quarter of what lenders expected to refund.
“Too many people are still finding the claims process too lengthy, the banks must streamline the process to make it easier for people to claim.
“Otherwise this leaves an open goal for claims management companies that charge people a hefty fee for putting in a claim which is easily done yourself for free.”