The Legal Ombudsman (LeO) has investigated almost 5,000 complaints about claims management companies (CMC) in the two years since its jurisdiction was expanded to cover them.
But it has been warned to expect a major influx of more complaints if the government’s personal injury reforms come to pass.
Releasing the figure today to mark the two-year anniversary of inheriting responsibility for CMC complaints from the Ministry of Justice, LeO said the two main reasons for complaints related to failing to refund up-front fees as agreed (27%) and delay (22%).
Complaints about delay included failure by the CMC to issue claims to the lender and failing to keep customers updated.
In two years, LeO has followed up 4,683 complaints after receiving what it described as “customer contacts” – a mixture of enquiries and complaints made by phone, e-mail or online – from 23,000 people in the first year and 32,000 in the second. In February 2015 Legal Futures reported LeO had received 1,000 contacts in the first three weeks.
LeO has the power to order compensation of up to £50,000, although most orders are for less than £1,000. It also has the power to impose fines of up to £100,000 on small CMCs and 20% of turnover on large ones.
However, in a measure of how the LeO views the ‘naming and shaming’ as being effective, it said that since using that power to highlight JAS Financial Advisory Services Ltd last August, the company has since closed and many consumers were compensated.
LeO also runs a “relationship management programme” offering guidance to CMCs and said it was “committed to regularly delivering professional learning courses”. It claimed that “a marked improvement in the quality of complaint responses CMCs issue to their consumers” had resulted.
Kathryn Stone, the chief ombudsman, said, “[LeO] has made a difference to hundreds of people’s lives over the last two years, investigating the service provided by CMCs and where appropriate, recommending financial and non-financial remedies.”
Andy Cullwick, head of marketing at leading CMC First4Lawyers welcomed LeO’s “positive impact over the last two years”, but observed that its caseload was “overwhelmingly made up of complaints against CMCs operating in the financial mis-selling market”.
He continued: “Those of us in personal injury and other areas are still funding its work, however, and so we hope the ombudsman is preparing for these poorly performing financial CMCs entering our market if the government’s personal injury reforms – in particular the increase in the small claims limit – come to pass.
“The Ministry of Justice itself expects CMCs to be on hand to help claimants instead of qualified solicitors, and we are already concerned that firms which currently cannot deal properly with the relatively simple issue of PPI have their eyes on the personal injury market.”
LeO took over responsibility for handling CMC complaints from the ministry’s Claims Management Regulation Unit under the Financial Services (Banking Reform) Act, which took effect on 29 December 2014. LeO recruited a team of 30 people to deal with the complaints.