Claims management companies (CMCs) face the prospect of having to provide financial compensation to unhappy customers after the government announced today that they are to come within the remit of the Legal Ombudsman (LeO).
The move will add substantially to LeO’s workload, as the Ministry of Justice’s (MoJ) claims management regulation (CMR) unit received 9,131 complaints during the last year, mainly arising from payment protection insurance claims, according to its recent annual report; LeO received 75,420 contacts, which turned into 8,420 investigations.
The move has been contemplated for some time and indeed there is specific provision for it in section 161 of the Legal Services Act 2007, which the MoJ will look to activate for the switch to happen in 2013.
LeO has greater powers to order redress than the unit, while the MoJ said the change will also enable the CMR unit “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”.
There have been suggestions that oversight of the whole unit would move to the Legal Services Board – as claims management is the only industry regulated directly by central government – but the statement indicates that this will not be happening.
Kevin Rousell, the head of CMR, said: “This reform is a win for consumers and provides yet another tool to help stamp out malpractice in the industry. Our CMR unit will continue to target those CMCs which do not comply and we will work in partnership with the Legal Ombudsman to root out those CMCs which take advantage of consumers.”
Chief Legal Ombudsman Adam Sampson said: “This is great news for the public and consumers as we have significant powers of redress to help protect them. We are confident we can support the claims management regulator to improve standards across the industry.
“Our priority now is to ensure we’re ready to start accepting complaints once all the necessary arrangements are in place.”
CMCs are currently required to operate a complaints-handling scheme under which, if a consumer complains about the service received, the business is given the opportunity to remedy matters. If the consumer is unhappy with how their complaint has been handled, they will often contact the CMR unit.
The annual report said: “We will seek to establish whether the business has breached any of the rules in their general conduct or in handling the consumer’s complaint. If the complaint is genuine and serious, we may intervene and contact the business to bring about a successful resolution.
“If a consumer believes the business has failed to comply with their complaint-handling procedure, they can request a formal review of their complaint by the CMR unit. Reviews involve a full re-examination of the facts and in some circumstances require further investigation and discussions with the business concerned. Only a very small proportion of the total number of complaints received are escalated in this way.”