The Government has announced that from April 2013, customers of claims management companies will be able to refer complaints about these firms to the Legal Ombudsman. The Government has the power to effect this change under Section 161 of the Legal Services Act 2007.
The Ombudsman can make legally binding orders on companies to pay compensation or offer other redress.
At present, customers of CMCs can submit complaints to the Ministry of Justice. However, this move will give customers added protection and will help the Ministry to focus on improving standards in CMCs and taking wider enforcement action against companies that break its rules.
The Ombudsman is funded by an annual levy from firms that come under its jurisdiction. A spokesman for the Ombudsman said it will consult with CMCs regarding the level of the proposed levy over the coming months. The Ombudsman also charges a case fee of £400 for the third and subsequent cases it receives from a firm each year.
The Ombudsman can instruct firms to award compensation of up to £30,000, although there are proposals to increase this to £50,000.
The Ombudsman started publishing quarterly complaints data in autumn 2012, and CMCs will be included in this once they come under the Ombudsman’s remit.
Kevin Rousell, head of claims management regulation at the Ministry of Justice, said: “This reform is a win for consumers and provides yet another tool to help stamp out malpractice in the industry.”
Adam Sampson, the chief Legal Ombudsman, also welcomed the news. “This is great news for the public and consumers as we have significant powers of redress to help protect them” said Mr Sampson.
“We are confident we can support the claims management regulator to improve standards across the industry.”
Claims management firms are urged to consider whether their current complaint handling processes are fit for purpose and whether they will be sufficient to limit the potential impact of decisions of the Ombudsman.