The Ministry of Justice (MOJ) has issued guidance to the claims management companies (CMCs) it regulates ahead of the forthcoming move of CMCs to the Legal Ombudsman’s jurisdiction.

The much delayed plan for customers to be permitted to refer complaints about CMCs to the Ombudsman finally comes into force on January 28 2015. A complaint made before this date can still be considered by the Ombudsman if the company’s final response letter to the customer is sent after the switchover date.

Perhaps the most important step CMCs now need to take is to update their complaints procedures, so that they clearly and unambiguously state that customers can refer complaints to the Legal Ombudsman, once the company has had an opportunity to look into the matter.

Customers of CMCs should be informed of the changes, and the MOJ asks that this is done on the next occasion that the company corresponds with a particular customer. So for example, a written paragraph could be added to all client letters, and a footer to any email sent.

When sending a final response letter, CMCs will need to make reference to the right to refer the matter to the Ombudsman, will need to state the time limit for referring the complaint (this is still to be determined) and will need to give the Ombudsman’s contact details.

The Ombudsman will also look at cases where the company has not sent its final response within eight weeks.

Companies will also need to train their staff regarding the changes.

During an investigation, the Ombudsman may make requests for paperwork or other information about a company’s dealings with the relevant customer, and the CMC will be expected to comply promptly with such requests.

The move will also, in one respect, reduce the powers of the Claims Management Regulator at the MOJ. The MOJ will no longer be able to request that companies apologise to customers or make refunds, as orders such as these will now be delivered by the Ombudsman where necessary. The Ombudsman will have the power to issue legally binding instructions to CMCs, under which they could have to pay up to £30,000 in redress to disadvantaged customers.

The Legal Ombudsman and the MOJ intend to work together under the new regime. For example, the Ombudsman may identify developing trends in the complaints received, and the MOJ may then use this information to take enforcement action against companies.

Fees to be paid by companies for funding the Legal Ombudsman service will be:

  • Turnover of under £5,000 – £75
  • Turnover of £5,000 to £14,999 – £150
  • Turnover of £15,000 to £24,999 – £250
  • Turnover of £25,000 to £74,999 – £340
  • Turnover of £75,000 to £163,636 – £540
  • Turnover of more than £163,636 – 0.33% of turnover up to £1 million, plus 0.22% of turnover between £1 million and £5 million, plus 0.18% of turnover above £5 million, all subject to a cap of £40,000.

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