The Legal Ombudsman is to be given powers to award redress to consumers who feel they have been mistreated by claims management companies.
The Ministry of Justice has announced it will give responsibility for complaints about CMCs to the ombudsman from next year, offering consumers an easier way of claiming compensation if they feel they have been treated unfairly.
The ombudsman could award compensation of up to £30,000 or take action to ensure a case was properly resolved. Officials are considering increasing the limit to £50,000.
Currently consumers can complain to the Ministry of Justice, which regulates CMCs but does not have powers of redress.
The legal ombudsman is funded by a levy on the relevant industry and a £400 case fee, with firms getting two “free” cases a year. A spokesman says it will consult with the claims industry about the size of the proposed levy over the coming months.
Chief Legal Ombudsman Adam Sampson says: “This is great news for the public and consumers as we have significant powers of redress to help protect them. We are confident we can support the claims management regulator to improve standards across the industry.”
Head of Claims Management Regulation Kevin Rousell says: “This reform is a win for consumers and provides yet another tool to help stamp out malpractice in the industry.”
Last week the Ministry of Justice announced it was cracking down on unscrupulous claim firms targeting payment protection insurance misselling claims.
The department has set up a specialist unit to investigate PPI misselling claim firms and agreed memorandums of understanding with the FSA, the Financial services Compensation Scheme and the Financial Ombudsman Service to share information and work more closely.