The government has pledged to “make every effort” to end the impasse and enable complaints against claims management companies (CMCs) to be handled by the Legal Ombudsman (LeO), more than a year after it committed to the move.
During a House of Lords debate, it said it hoped to bring an amendment forward next month to the third reading of Financial Services (Banking Reform) Bill.
Baroness Dianne Hayter, the former chair of the Legal Services Consumer Panel, tabled an amendment to shift CMC complaints handling from the Claims Management Regulator (CMR) to LeO during the bill’s second reading.
For the government, the deputy chief whip in the Lords, Lord Newby, persuaded the baroness to withdraw her amendment on the grounds that “it does not fully bring about the changes that she seeks to implement”.
The minister then pledged to try to bring an amendment at the third reading, which is scheduled for 9 December. He said: “If we can do it… we will. I am advised that there are a number of technical and procedural issues that we have to go through. I hope we can do it at third reading. I shall certainly press very hard that we do, and every effort will be made to achieve that.”
Dr Hayter complained that the Legal Services Act envisaged that LeO would be the avenue for redress and that there had been political agreement on the move since the government announced its support in August 2012 . Since then there had been an impasse: “We keep hearing ‘don’t worry about it, don’t worry about it’.”
The technical sticking point has been how LeO’s costs can be recouped from CMCs. The CMR is part of the Ministry of Justice and would become leviable for funding LeO’s work – a breach of public finance rules on one part of government levying another. The Legal Services Board fears a successful legal challenge  if the switch to LeO was made; it is also not prepared to levy CMCs individually.
During last night’s debate, the government introduced changes to the banking bill to enable the CMR to be given the power to impose financial penalties on CMCs judged to have acted irresponsibly, such as acting speculatively, “which can impose unnecessary costs on defendant businesses and ultimately on consumers”, Lord Newby said.
Adam Sampson, the chief ombudsman, told Legal Futures that it was encouraging to hear “the government has reiterated its commitment” to switching CMC complaints to LeO, but he was concerned “the timetable is very tight” and “effectively gives [the government] less than a week to construct it”.
He suggested there might be some benefit if the relevant amendment was made in a forthcoming bill on consumer rights, “which would offer the opportunity not merely to deal with the technical CMC issue but to provide a platform for any wider reforms to the Legal Ombudsman’s jurisdiction that might be necessary in light of the European Union directive [on ADR]”.
The delay would “give us time to take a slightly longer term and more strategic view of what roles the Legal Ombudsman should play in what we hope to be a reconstructed redress system”, he added.
But there was a pressing need for empowering LeO to cover complaints against CMCs, he said. There was a “steady stream” of people who wanted to raise the issue of CMCs with LeO, and the financial ombudsman had provided “similar feedback”. He continued: “So from a ombudsman point of view, we are planning for a very significant increase in work if this change is made.”
Mr Sampson said LeO had “never been entirely clear about the nature of the technical difficulty that others perceive” about CMCs funding LeO and “it’s not been an issue which we or our lawyers have considered was insurmountable. We’ve always been of the view that repeating primary legislation was unnecessary and that there was, albeit slightly imperfect, nevertheless workable primary legislation in the Legal Services Act”.
A spokesman for the MoJ said: “We are working with HM Treasury with the intention of having amendments in place for third reading. We want to ensure any legislation brought in is sound.”