My Lords, I turn finally to the amendments that deal with claims management companies and the Office for Legal Complaints. It is essential that a new route of redress is available to consumers who feel that they have received a poor service from those providing claims management services, commonly referred to as claims management companies, or CMCs. It is also right that the claims management industry bears the cost of providing this new route of redress. I thank the noble Baroness, Lady Hayter of Kentish Town, for raising this issue at Report stage and I am delighted that she has put her name to this amendment.
Section 161 of the Legal Services Act 2007 already makes provision for bringing complaints about regulated CMCs under the jurisdiction of the Office for Legal Complaints. Once commenced, this will give consumers greater scope for redress against regulated CMCs, including awards for financial compensation. Before Section 161 can be commenced, however, the correct mechanisms need to be put in place to ensure that the costs incurred by the OLC in relation to complaints about CMCs can be recouped. It is also necessary to ensure that these costs are borne by the claims management industry. It is right that costs associated with complaints about CMCs are paid for by the industry which creates them. It is also right to prevent the legal profession having to foot the bill for these costs or benefit from any income generated from recouping these costs.
Turning to the detail of the amendments, it is usual practice for the designated regulator to recoup the costs of redress from those it regulates. In this case, the Claims Management Regulator, or CMR, is the designated regulator. The Legal Services Board, or LSB, will then levy the regulator for the OLC’s costs and reimburse the OLC. To ensure that the Claims Management Regulator can recoup the OLC’s costs, these amendments change the Compensation Act 2006 to enable the Secretary of State to make regulations to allow the
Claims Management Regulator to charge CMCs, as part of their fees, for the OLC’s costs associated with CMC complaint-handling. The Legal Services Act 2007 already provides for a levy on the Claims Management Regulator, if one is designated. This enables the LSB to levy the regulator for costs incurred by the OLC in relation to claims management costs.
That mechanism is applicable only when there is a designated person as the Claims Management Regulator. When no person is designated as the Claims Management Regulator, as is currently the case, this role falls to the Secretary of State. The mechanism does not operate in this situation as the Secretary of State cannot be levied. To address this, amendments to the 2007 Act are needed. They will change the Act to give the Lord Chancellor a new power to make regulations to allow him to recover the OLC’s costs associated with CMCs. These powers allow the Lord Chancellor to charge a periodic fee on regulated CMCs.
Finally, in this situation further amendments are needed to address cross-subsidisation. The amendments will change the levy mechanism in the Legal Services Act 2007 to ensure that the calculation of the OLC’s expenditure which is leviable on the legal profession excludes both its costs and its income in relation to CMCs.
These amendments are an important step in improving the redress system for consumers who have suffered from poor service from the claims management industry. It is right that consumers who have been treated unfairly are able to access this new route for redress through the OLC. I beg to move.