Compensation (Claims Management Services) (Amendment) Regulations 2015

Baroness Hayter of Kentish Town Excerpts

Monday 1st December 2014 Grand Committee

[The Minister of State, Ministry of Justice (Lord Faulks) (Con)]

My Lords, the Legal Ombudsman provides a route of redress for consumers where they have complaints about the service they receive from regulated legal service providers. There is no charge to consumers for bringing complaints with costs being met by the regulated businesses that fall within its jurisdiction.

Section 161 of the Legal Services Act 2007, once commenced, will extend the remit of the Legal Ombudsman to enable it also to deal with complaints about claims management companies regulated under the Compensation Act 2006. I know that noble Lords will welcome the Legal Ombudsman being able to deal with these complaints. The claims management sector has acquired a reputation for being somewhat unscrupulous as a result of a number of companies engaging in poor business practices. The Legal Ombudsman will provide a new avenue of redress for consumers of regulated claims management companies and will assist the Claims Management Regulator in driving out poor standards and practices in the market. The Legal Ombudsman has a greater range of redress powers, including the potential for awards of compensation which are not currently available.

The fees order enables the Lord Chancellor to impose fees on regulated claims management companies to recoup the costs of complaints handling by the Legal Ombudsman. It sets out the fees payable by regulated claims management companies for this purpose. These fees will be charged on a sliding scale based on the relevant turnover of the regulated claims management company. This will enable the Government to achieve full cost recovery without putting a disproportionate burden on small and medium-sized businesses. The Government will keep the fee structure under review and will consider making changes when more information is available on complaints volumes and the types of complaints that are being considered by the Legal Ombudsman. If this order is approved, we will commence Section 161. It is intended that the ombudsman will commence this new work on 28 January next year, subject to parliamentary agreement.

The amendments to the Compensation (Claims Management Services) Regulations 2006 make the current regulations compatible with the requirements of the Legal Services Act 2007. In order to enable the handling of complaints about claims management companies by the Legal Ombudsman certain changes must be made to the powers of the Claims Management Regulator. These include the removal of the regulator’s power to award redress, the removal of the power to review how a claims management company has dealt with a consumer’s complaint and amendment of the power to issue directions to a claims management company. The amendment regulations also allow for information sharing between the regulator and the Legal Ombudsman in specified circumstances, something that is particularly important in ensuring a robust regulatory regime.

In conclusion, it is right that the Legal Ombudsman’s costs relating to regulated claims management complaints are met by the claims sector in the same way as the costs relating to legal complaints are met by that sector. This fees order will achieve this. The amendment regulations make the relevant claims management regulations compatible with the Legal Services Act and in so doing allow for claims management complaints handling by the Legal Ombudsman. I commend the order.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I thank the Minister for introducing these two orders, which, not surprisingly, we warmly welcome. They will allow complaints against CMOs to be taken to the Legal Ombudsman and will enable LeO to raise the necessary money to fund that. My only complaint, for which I gather I cannot get redress, is that it has taken rather a long time. It was actually August 2012 when this rather excellent policy decision was taken, and it was announced by the then Parliamentary Under-Secretary at the MoJ, Jonathan Djanogly. However, as the Minister said, it will not actually come into effect until 2015.

However, the Minister might not know that I have long form on this one. The initial delay after the policy was stated was, of course, not his department’s fault, but the fault of the Treasury, which raised umpteen issues about raising a levy to enable the cost to be met for the work that LeO did. It was therefore in my name that we tabled an amendment to the Financial Services (Banking Reform) Bill in order to implement that. It was an effective intervention by his predecessor, the noble Lord, Lord McNally, together with the noble Lord, Lord Newby that managed to finally unbundle all of this. That enabled the Government to produce the correct amendment, which appeared in the names of the noble Lord, Lord Deighton, and myself. That is why I am so happy that this is finally here today. It is a shame that it has taken so long: even that amendment was in December last year, so it has taken another 12 months for it come here. Given the role of the noble Lords, Lord McNally and Lord Newby, in this, perhaps we should call it the McNally/Newby amendment. It will be important for complaints about those companies, so we wish it well and wish LeO all haste and good work in taking on these complaints.

[Lord Faulks]

I am grateful for the noble Baroness’s comments. As she says, she clearly has form in this area and has made a contribution to the development of the approach to this issue. In fact, the existing arrangements allow for certain remedies that could refund fees and order that the work be redone if feasible and direct that an apology be made. However, this gives a much greater power to the consumer and it seems to us—and I pay tribute, as she does, to the noble Lords, Lord McNally and Lord Newby, in assisting in this—that it should be financed by those claims management companies and that the complaints are now properly directed to the Legal Ombudsman, who should be able to deal with them in the most effective way possible. I suggest that, while this new route is obviously a little bit late, it is nevertheless the right answer.