Claims management companies face compensation awards of £30,000 as LeO takes control

Claims management companies face having to pay up to £30,000 to unhappy customers next year, the same penalties faced by law firms, as LeO takes over responsibility for complaints from the MoJ.

Adam Sampson, the chief legal ombudsman, told Solicitors Journal that he would also be able to order CMCs to return fees. Complaints about CMCs are currently handled by the claims management regulation unit at the MoJ, which lacks these powers.

Sampson said the details of how much CMCs would pay towards the costs of their new complaints handler were still being worked out, but they would cover a proportion of LeO’s fixed costs, such as IT and rent, and the “overall cost to lawyers will go down”.

Sampson said: “The key promise is that the cost in terms of our work relating to CMCs will be paid entirely by the claims management industry and none of this will be at the expense of lawyers.

“Until now the public has had no ability to get redress for poor service from claims management companies, for example if they are overcharged.

“By turning on the power of the Legal Services Act the general public will have as much protection when they go to a claims manager as when they go to a lawyer.”

Sampson said LeO was discussing with the MoJ creating a ‘voluntary jurisdiction’ so it could handle complaints relating to suppliers of legal services not currently regulated by the Legal Services Board, such as will writers.

However, he said LeO would need to get claims management “under its belt”, which would take “well into 2013”, before extending its remit further.

“We’re anxious to fulfil the original mission of our board, to ensure that all consumers of legal services have access to redress,” he said.

Sampson added that parliamentary approval, through the negative resolution procedure, would be needed before LeO could take over responsibility for CMCs.

A spokeswoman for the MoJ said the change would enable the Claims Management Regulation Unit, which will remain within the Ministry of Justice, to “refocus its resources on working with the claims management industry to improve standards and take wider action against CMCs who consistently breach the rules”.

Kevin Rousell, head of claims management regulation, said: “This reform is a win for consumers and provides yet another tool to help stamp out malpractice in the industry.

“Our Claims Management Regulation Unit will continue to target those CMCs who do not comply and we will work in partnership with the Legal Ombudsman to root out those CMCs that take advantage of consumers.”