Government confirms CMC complaints regime for January
Consumers who have received poor levels of service from claims management companies will soon be able to make better, more robust complaints after the UK Government confirmed that the Legal Ombudsman (LeO) will begin receiving complaints from 28 th January 2015 - two and a half years after the government first indicated plans to switch from the Claims Management Regulator. The news broke after the Ministry of Justice (MoJ) published its response to a consultation on how CMCs will be charged to fund the complaints the LeO is expected to receive.
Under current regulations, CMCs are not expected to pay consumers compensation if they're found guilty of misconduct. However, once the Legal Ombudsman takes control of the complaints procedure, this will no longer be the case and CMCs will be expected to compensate people who they have misrepresented.
Who will cover the costs incurred by LeO?
In the MoJ's report, it was revealed that the LeO expects to handle around 3,000 cases a year, which will cost the organisation around £3.2 million in total.
To fund the cases, the MoJ has announced that CMCs will be charged annually on a sliding scale based on each firm's annual turnover. Bigger claims management companies will be charged 0.33% of their annual turnover if it totals less than £1 million. Should their turnover be higher, CMCs will be charged an extra 0.22% on turnovers between £1 million and £5 million, and an extra 0.18% on turnovers above £5 million.
Smaller CMCs with turnovers between £75,000 and £163,636 will be charged an annual fee of £540, and this will be reduced to £340 for CMCs with a turnover of between £25,000 and £75,000. The Ministry of Justice also revealed that a minimum charge of £75 will be issued to all CMCs with a turnover of less than £5,000.
Complaints over sliding scale fees
In a fees consultation earlier in the year, the Ministry of Justice said that it had the support of 11 respondents (with 13 against it) and that the most prominent fears regarding the issue that larger firms will likely end up paying higher fees to subsidise lower fees paid by smaller firms; many larger firms have said that smaller firms are likely to have poorer customer service levels and therefore a higher complaints record. Concerns were also raised about the number of complaints the LeO expects to receive, with many suggesting that 3,000 was underestimating the probable figure.
The Ministry of Justice has however refuted these claims arguing that the government was committed to recovering LeO's claims management costs from the regulated claims industry. The MoJ continued by saying that the fees sliding scales would be the only way of recouping costs without excessively burdening smaller CMCs.
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