The Legal Ombudsman is planning a 66% rise - to £50,000 - in the maximum amount of compensation it can force lawyers to pay clients who receive poor service.

It also plans a six-fold increase - to six years - in the time limit within which clients can lodge a complaint with the watchdog. The proposals are outlined in a consultation paper that discusses suggested reforms of the Ombudsman scheme and case fee structure, both of which the watchdog pledged to review 18 months after opening its doors in October 2010.

Experience so far has shown that the current financial compensation of £30,000 is 'insufficient’ in some cases, LeO argues, though it stresses that most awards so far have been under £1,000 and only a 'handful’ over £20,000.

'If the Ombudsman scheme is intended as an alternative the courts, it is necessary for the value of the orders to make it a viable alternative,’ it adds. 'We are conscious that there may be times when complainants may be reluctant to use the Ombudsman because of the limit and as they would need to limit the amount they may receive.’

On time bars, the Ombudsman proposes changing the scheme so that complaints can be accepted up to six years from an event or three years from knowledge of the event. A one-year limit presently applies in both cases. This is necessary to harmonise with the courts and other Ombudsman schemes, and to reflect the likely 'join-up’ of financial and legal complaints with the advent of alternative business structures, it argues.

The regulator is also considering changing case fees so that they take into account how the levy on regulators and case fee interact, and so that they are simpler to operate and administer.

Case fees have contributed just 1% of the Ombudsman’s budget against the expected 5% - partly because where case fees have been charged against failing firms, the firm has subsequently gone out business without paying.

The Ombudsman does not expect to collect 18% of case fees charged so far. LeO is also consulting on the circumstances in which it might accept third-party complaints against lawyers by people other than those who engaged them.