The Legal Ombudsman has demanded to know when legal regulators plan to take action over consumer complaints about conditional fee agreements.
The ombudsman reported in January that the use of ‘no win, no fee’ agreements should be reviewed by regulators to protect consumers. The report stressed that lawyers should take care to explain the conditions attached to these arrangements and make clear where the client may end up incurring legal costs.
Around 8% of complaints received by the service relate to CFAs, often with a ‘substantial’ impact on consumers. In one case seen by the ombudsman, the consumer faced an unexpected bill of £30,000 for legal costs where lawyers broke the terms of their CFA.
In an open letter to regulators, chief ombudsman Adam Sampson (pictured) said consumers still do not feel they are receiving clear information from their legal services provider.
‘As the legal market continues to evolve we need to be confident that consumers can access services with confidence and understand the financial risks that are involved, however the work is funded,’ said Sampson
‘When we published the "no win, no fee" report we asked regulators to review and monitor the issues in the report and propose ways to ensure there is greater consistency in the standards in this area,' he told the regulators.
‘Having not heard anything in response from you, I am writing directly to ask what plans you have for addressing the issues raised in the report.’
The ombudsman has also asked whether it is appropriate to continue to use the term ‘no win, no fee’ as it is clearly one which has the potential to lead to confusion and misunderstanding.
The LeO handled around 600 complaints about CFAs last year – around 8% of the total number of complaints – and said the impact when they go wrong can be heavy.
The ombudsman report in January highlighted a ‘structural weakness’ in the nature of agreements which allows some lawyers to pass the risk of unrecovered costs onto the consumer.
Agreements were also found to be complex and unclear in terms of the financial risks to consumers.