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Legal Ombudsman Scheme Rules – how the changes affect law firms

In our recent webinar we looked at the changes that are being made to the Legal Ombudsman (LeO) Scheme Rules (‘Rules’) from 1 April 2023; we also covered the feedback we had obtained from the LeO in relation to a number of questions we had around the changes.

The LeO has been keen to point out the purpose of the changes, with the Chair of the Office for Legal Complaints saying, “The changes are not about closing doors to customers but about identifying new freedoms and building in the ability to resolve complaints in a proportionate and more efficient way. It is about achieving a more balanced approach and creating a quicker customer experience, whilst retaining the core benefit of accessing independent and fair legal redress.”

Compliance Legal Sector

Posted 26/01/2023

Changes that could have an impact on law firms

  • Rule 2.8(c) – the complaint must relate to services which the firm provided to an estate of a person who is deceased where the complainant is a beneficiary of that estate

  • Rule 2.11 - the LeO may decline to accept a complaint for investigation if, in an Ombudsman’s reasonable opinion, the complaint is frivolous, vexatious, lacks merits, where there has been no significant detriment caused to the complainant or where there is a compelling reason not accept it

  • Rule 4.5 - ordinarily the complainant must refer the complaint to the LeO no later than:
    • One year (currently six) from the act/omission; or
    • One year (currently three) from when the complainant should reasonably have known there was cause for complaint

  • Rule 5.4 - if a firm claims that all or part of the complaint is not covered by the LeO, or is out of time, or should be dismissed, then the firm should provide reasons for their challenge at the earliest opportunity

  • Rule 5.7(b) - an ombudsman may (but does not have to) dismiss or discontinue all or part of a complaint if, in his/her opinion the complainant has not suffered (and is unlikely to suffer) significant financial loss, distress, inconvenience or detriment

  • Rule 5.7(c) - an ombudsman may (but does not have to) dismiss or discontinue all or part of a complaint if, in his/her opinion a firm either offers fair and reasonable redress in relation to the circumstances alleged by the complainant during the course of the ombudsman’s investigation or has already offered fair and reasonable redress in relation to the circumstances alleged by the complainant which has either already been accepted by the complainant or is still open for acceptance

  • Rule 5.7(o) - an ombudsman may (but does not have to) dismiss or discontinue all or part of a complaint if, in his/her opinion it is frivolous or vexatious

  • Rule 5.7(p) - an ombudsman may (but does not have to) dismiss or discontinue all or part of a complaint if, in his/her opinion it would not be a proportionate use of the ombudsman’s time to investigate the complaint, due to the likely impact or due to its complexity, the amount of evidence provided, or due to the conduct of the complainant during the investigation

  • Rule 5.7(q) - an ombudsman may (but does not have to) dismiss or discontinue all or part of a complaint if, in his/her opinion the ombudsman considers that there has been undue delay in the complainant raising the complaint

When you look at the above changes it is easy to see why some sceptics might suggest that they are just intended to reduce the backlogs that have bedeviled the LeO over the past few years!

LeO clarification

As already mentioned, we raised a number of questions about the changes with the LeO, and here is the essence of what was said:

  • Time limits – firms must inform complainants about both the six month deadline for escalating a complaint to the LeO, and the new one year deadlines (see SRA Code of Conduct 8.3(c) and 8.4(a));

  • Time limits and jurisdiction – it is not for firms to determine whether a complaint is out of time and/or jurisdiction, for example the client is a large company that is not a micro-enterprise; best practice is to deal with all complaints under the firm’s internal complaints procedure and leave the LeO to determine whether it wants to handle them or not;

  • Who can complain? – the LeO admitted that there is a conflict between its Rules and the SRA Code of Conduct in relation to who can complain, in that the SRA says that a client ‘means the person for whom you act and, where the context permits, includes prospective and former clients’, whereas the LeO says it can accept complaints from anyone connected with a transaction;

  • Discretion – the LeO will use its discretion on a ‘fair and reasonable’ basis and is likely to exercise this widely, especially during the transition period where clients may have engaged a firm under the 6/3 year time limits. The LeO is unable to exercise discretion over jurisdiction but it is still not for firms to assess this;

  • Referral to the SRA – the LeO will refer firms to the SRA for misconduct where it finds firms have not complied with their regulatory complaint handling obligations, for example, where a firm has not corresponded with a complainant whose complaint is out of time/jurisdiction;

  • Case fees – no changes have been made to the current £400 case fee, but this is to reviewed in due course. A case fee will be applied where a complaint that is out of time/jurisdiction has not been handled in line with a firm’s complaint procedure;

  • Signposting – it is good practice to signpost complainants to the LeO Rules in addition to the mandatory requirements to provide LeO details covered by the SRA rules above.

The new Rules come into force on 1 April 2023, and according to the LeO firms need to notify clients ‘from’ this date, whereas the Law Society says firms should do this ‘before’ this date; the LeO has now said that firms should inform clients ‘before’ this date, but neither oganisation has provided guidance on how this should be done.

Now that we have been provided with clarity from the LeO we will update our template complaint policy and associated documents and will release them to subscribers as soon as possible so they can send their updated complaint procedure to clients and update their websites accordingly; non-subscribers are advised to do the same once they have updated their policies, etc.

The LeO has said that it will publish detailed guidance and FAQs prior to 1 April 2023, but hopefully the above will help give you a head start! 

What could be coming soon!

The Legal Services Board has intimated that it may publish firm level complaints; it is also thinking about making firms offer redress to clients who have not complained where they have suffered the same issue as clients who have. It is also considering the implementation of stronger rules on how clients are informed about their right to complain, and to ensure that verbal expressions of dissatisfaction are treated as complaints.  

It is key that firms start to prepare for what is, and may be, coming their way; as Benjamin Franklin once said, “by failing to prepare, you are preparing to fail”!