The Legal Ombudsman expects to receive 3,000 extra cases a year once it assumes responsibility for complaints about claims management companies, the Ministry of Justice has revealed.
Handling these complaints will cost around £2.9m a year, on top of £800,000 to set up the scheme.
The estimates appear in a consultation published by the MoJ yesterday seeking views on how the revamped system will work. It is expected that the ombudsman will handle complaints about CMCs from the end of this year.
The MoJ said it had considered a number of options on the fee structure for CMCs, from charging the taxpayer to taking a flat fee from claims management companies. The final proposal is to charge complaints fees on a sliding scale of fees based on a company’s turnover.
Under the proposals companies turning over between £75,000 and £163,636 will pay an annual fee of £540. Any companies with a higher revenue will pay a percentage of their takings, with fees capped at £40,000.
Currently, firms with a turnover of less than £25,000 make up 40% of the industry: these companies will pay up to £250 in fees.
The consultation document says: ‘Any other way of structuring the fee, including a flat fee, would not be justified in these circumstances as it would have a disproportionate effect on small and medium entities, potentially forcing some firms from the authorised market because the fees would be unaffordable.‘
The extension of the ombudsman service has been promised by the government since August 2012 but has been delayed over concerns about funding.
In 2013/14, the service dealt with around 69,000 contacts about law firms, of which 20,000 were complaints. Of these, 8,055 required an investigation.
The Legal Ombudsman’s total operating expenditure for 2013/14 was £15.7m.
The size of the claims management industry has decreased since the referral fee ban was introduced last April. The total number of CMCs dropped by more than 1,000 from a peak of 3,367 in 2011 to 2,254 in November 2013.
The consultation closes on 6 June.