The Financial Ombudsman Service has said its reserves had been "significantly" reduced after a 40% jump in the number of complaints about controversial payment protection insurance it handled.
The group expects to receive around 68,000 disputes between consumers and providers relating to the product during the 2010/2011 financial year, more than for any other product.
It said the workload was significantly higher than the 46,000 PPI cases it had budgeted for, with individual cases taking longer to resolve, as some businesses were being "less co-operative" in progressing them.
As a result, it expects to resolve a total of only around 180,000 cases during the current financial year, down on the 210,000 it originally predicted.
The high volume of PPI cases has contributed to a drop in income for the Ombudsman, which derives 80% of its funding through case fees, as it has resolved fewer disputes.
It has had to expand its team of staff significantly to deal with PPI complaints, at a cost of £2m, while it has also had to use contractors to deal with cases on the issue.
Overall, the group said it would end the year with a deficit of £8m, which would be met out of its reserves.
The Ombudsman expects its caseload to remain volatile during 2011/2012, mainly due to the ongoing issue with PPI.
In October last year, the British Bankers' Association launched a judicial review on the way PPI complaints are handled, which the Ombudsman warned could lead to additional costs.