My Lords, this is a technical amendment to cover a gap which I would have hoped the Government would have covered by now. It is an amendment to the Legal Services Act 2007 and it deals with complaints from consumers about the activities of claims management companies, about which we have heard a fair amount in this House, particularly at the initiative of my noble friend Lord Kennedy of Southwark.
The purpose of the amendment is to enable the Office for Legal Complaints, that is to say the Legal Ombudsman, to receive payments from the Lord Chancellor under Section 172 of that Act for its costs in relation to handling complaints against those claims management companies.
There has been a pretty widespread air of complaint in this House and in wider society about the activities of claims management companies. Citizens Advice has identified a whole range of problems in this area, from the time and resources wasted on invalid claims through to the aggressive, intrusive and often offensive methods of marketing. I suspect most noble Lords have received an odd text within the past few days, offering them untold riches under the PPI arrangements. It is not just consumer groups that want action on this front. The FLA—the Finance and Leasing Association—would look for an improvement to CMC regulation and, in particular, the tens of thousands of unfounded claims received from CMCs in respect of products which, as we all know, were never sold in the first place. This is a huge irritation which is misleading for consumers and diverts activity for providers, so we need a complaints system which is recognised as robust by consumers and providers alike. We want the Legal Ombudsman service to be able to accept complaints against claims management companies that breach the regulation.
Following discussion on several occasions in this House, the Minister has assured us that regulation is being tightened up to stamp out some of the more horrendous practices that we have heard about and, indeed, been subject to. One of these assurances was in relation to access to redress for consumers. The Government announced on 28 August that complaints handling companies would be handled by the Legal Ombudsman, using the powers under the Act to which this is an amendment. That was repeated by the Minister on 20 November in response to a debate introduced by my noble friend Lord Kennedy. However, I now understand that, due to the Government’s decision to leave claims management regulation within the department —as distinct from an outside regulator—the provisions
that would have allowed the Legal Services Board to levy the claims management regulator for Legal Ombudsman expenditure are now deemed unworkable.
The amendment therefore seeks to remedy that position. It allows the Lord Chancellor—in other words the Ministry of Justice, which is, effectively, the claims management regulator—to make payments direct to the Legal Ombudsman without any subsidy by existing ombudsman levy-payers, who are lawyers and are not, of course, party to these complaints.
My understanding is that such money would need to come from a levy on claims management companies rather than the general taxpayer—quite right, too—and that the only effect of the amendment would be to allow the only body with authority to levy them, the Ministry of Justice, to pass such funds to the Legal Ombudsman. Despite this being a levy on these firms, the Treasury has stated that, under the Legal Services Act as currently drafted, the Secretary of State as the regulator of claims management services cannot be designated a leviable body for Legal Ombudsman purposes. The levy is technically considered a tax, and thus a public body, the Legal Services Board as the collector of the levy, cannot impose a tax on government.
It is for this reason that primary legislation to amend the Act is needed. I hope that the Minister, who is supportive of action on this front, can support the amendment. The legislative change that is needed to facilitate it must happen immediately, so that consumers are not left without a course of redress. This is necessary so that the ombudsman can handle complaints as well as provide better intelligence to the regulator and the industry to drive better practice.
Amendment 120, which complements the first amendment, would allow the technicalities to come into force immediately on Royal Assent without further, secondary legislation being required. It seeks to cover a gap in the present arrangements. The Minister may have a better way of so doing. If so, it is a pity that he has not come forward with it already. Nevertheless, I am prepared to hear what he says. If he is prepared to bring forward an alternative amendment which covers the same points at Third Reading or ensures that there is provision for the Legal Ombudsman to be financed in this way, I will probably be prepared to withdraw the amendment. However, it is a gap that needs covering. At this relatively stage of the Bill, a commitment from the Government to do so is necessary. I beg to move.