MoJ pledges claims management clampdown under ombudsman
The government today sets out a long-expected plan to give the Legal Ombudsman responsibility for complaints about claims management companies (CMCs). The move, reported in the Gazette in February, will take place in April next year, the Ministry of Justice will announce.
At present, complaints about claims management companies (CMCs) are handled by the ministry’s Claims Management Regulation Unit. Today’s announcement says the change allows the unit, which will remain within the MoJ, ‘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’.
Section 161 of the Legal Services Act 2007 allows the Legal Ombudsman Scheme to be extended to claims management services. The ministry claimed the move would mean any CMC that provides a poor service could be forced to pay compensation or provide another form of redress.
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.’
Adam Sampson, the chief legal ombudsman, said his office has ‘significant powers of redress’ to help consumers. ‘Our priority now is to ensure we’re ready to start accepting complaints once all the necessary arrangements are in place.’
Proposals to bring complaints about claims management into the ombudsman’s remit were confirmed by the Office for Legal Complaints earlier this year. Sampson said at the time that the extension of responsibility would allow the cost of his office to be spread more widely.
Desmond Hudson, Law Society chief executive, said: 'We welcome the government’s consultation. However, we remain concerned that the Claims Management Regulator has an uphill task in regulating people who are at the fringes of respectability. We regard it as instructive that the regulator is consulting on the wisdom of allowing these organisations to refer to the fact of their being regulated by the MoJ, which suggests that the MoJ has doubts about its own regulatory regime.
'The fact that over 8% of claims managers had their licenses removed in 2011/12 and over 17% left the market suggests an industry in turmoil with too many companies bringing the legal process into disrepute by encouraging weak claims.
'In our view, the government needs to take a much more robust attitude to these organisations. The alternative business structure regime provides an opportunity for legitimate firms to be regulated consistently with solicitors and other legal services providers, while the referral fee ban will significantly affect the activities. It is hard to see why there should be a place for the remainder.'
Today’s announcement follows the launch last week of a consultation on strengthening rules governing claims management companies.