Legal Ombudsman urges CMA to extend reach to unregulated firms

CMA: Recommended extending LeO’s jurisdiction

The Office for Legal Complaints (OLC), the governing body of the Legal Ombudsman (LeO), has renewed its call for it to be allowed to extend its reach to unregulated legal services providers.

The Competition and Markets Authority (CMA) said last month that it would revisit the issue in its three-month progress review on whether competition in legal services has improved since its market study published in December 2016.

The CMA recommended then that extending LeO’s jurisdiction to include consumers of unregulated firms should be considered, as did Professor Stephen Mayson’s recent review, which identified this as a change that could be made in the short term while more fundamental changes to regulation were considered.

In its response to the CMA’s call for submissions, the OLC said improving public legal education was not enough to protect consumers of unregulated providers.

The OLC said it agreed with Professor Mayson that the “level of risk and impact on the public interest” should govern access to LeO rather than professional title or whether the activity was reserved.

“If redress is considered from this viewpoint, then it becomes difficult to argue for the distinction between regulated and unregulated providers to be maintained,” the submission said.

“If sufficient risk exists for a solicitor who is writing a will, administering an estate, or providing immigration or employment advice then arguably the same risks exist for those unregulated providers, and the same protections should be in place.”

The OLC said it was important to consider which areas of the unregulated sector might fall under an extended redress regime.

“Will-writing, paralegals and immigration are often considered, however there may be merit in looking more broadly (which would encompass general legal advice and special bodies such as law centres and trade unions) to gain a full understanding of the extent and nature of possible detriment which exists.”

The OLC said “there should not be an assumption that the current ombudsman model and powers are appropriate for the unregulated sector” and a review of the existing complaints system would have to be undertaken, along with consideration of the “appropriate compensation fund and professional insurance models”.

If it were decided to extend redress to the unregulated sector, the OLC said there was “merit in developing a single register” of legal services providers.

“This would have the benefit, for those interested consumers, of providing certainty for consumers about the level of regulation, and protection available to them.”

The OLC also called for a review of the idea of an “information gateway” for legal services, raised in Professor Mayson’s report.

While LeO received from 70,000 to 100,000 contacts every year, it only usually accepted around 6-7,000 cases, a “significant” amount of which were referred to other organisations, such as the Citizens Advice Bureau.

“It is also known that regulators undertake a similar function, and that there are situations where consumers are bounced around the system because organisations aren’t always sure who is best placed to deal with something.

“It would be interesting to establish whether this is a significant issue, and whether there are efficiencies that can be gained from a streamlined approach.”

Adding a note of caution, the OLC pointed out that LeO was “working within a standstill budget this year”, with aspects of its work “significantly affected” by Covid-19, and that LeO was committed to supporting work to improve redress for consumers of unregulated firms “should funding allow this”.

The OLC has repeatedly called for a voluntary redress scheme to be set up to cover unregulated firms – ever since LeO’s first birthday in 2011. Former chief ombudsman Adam Sampson later argued that a voluntary scheme would plug the gap left by the government’s refusal to regulate will-writing.

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