First-Tier Complaints and Legal Ombudsman Levy Review

11 September, 2024

In May this year, the Legal Services Board (LSB) published its First-tier Complaints Policy,  emphasising that users of legal services and the public should have confidence in accessing high-quality legal services and a mechanism for resolving their concerns effectively.  

If issues are not resolved at the first-tier level, users should have access to the Legal Ombudsman (LeO), a second-tier resolution option. The policy outlines a key outcome for regulators: to ensure the best possible complaints resolution system by utilising information from both first-tier and second-tier complaints (our emphasis). 

To align with this outcome, we conducted a standalone, voluntary Complaints Survey in June. This survey aimed to gather data on complaints handling at the practice level, establishing a benchmark to assess progress towards the LSB’s objectives over time. In CLC regulation, the goal is to foster continuous improvement in complaint handling and legal service quality, reducing the number of first-tier complaints and those escalated to the Legal Ombudsman.   

Therefore, alongside these policy initiatives, the CLC has been consulting on changes to the Legal Ombudsman (LeO) levy that practices pay. The CLC first implemented a ‘polluter pays’ model in April 2022, setting the current ratio at a 70% usage fee and 30% availability fee. The proposal is to move to a 50/50 ratio, further incentivising better complaints handling AND providing a benefit for those practices with fewer matters referred to LeO.   

As well as a financial benefit for practices with low numbers of second tier complaints, this shift is a professional good serving the best interests of consumers and emphasising the importance of good complaints handling in meeting regulatory expectations consistent with the CLC’s consumer-focused regulation agenda.   

How will your practice be impacted by the proposed change to the Legal Ombudsman levy?   

The good news is that 83% of practices will end up paying less under the proposed ‘polluter pays’ model, and 80% of respondents to our recent consultation on changes to regulatory fees support the move to a 50/50 ratio.   

111 practices with no cases will pay less 

54 practices with cases will pay less 

34 practices will pay more 

25 of the practices that with pay more will pay less than £2,000 extra 

9 practices will see their charge increase by more than £2,000  

We are considering the comments made in the survey, including the point that basing the charge on complaints accepted for investigation (which can result in no finding of shortcoming by the practice) is unfair and points to inconsistencies in the way LeO selects cases. These are matters that we are in active dialogue with LeO about, but for now we must work on the basis of the LeO dataset as is.  It is worth noting that if the charge per case were restricted to only those relatively few cases in which shortcomings on the part of the practice were identified, the cost to practices would be extremely high given LeO’s current and projected costs, and therefore likely unworkable in practice.   

The Challenge we issue to practices 

The changes will incentivise practices with disproportionate levels of referrals to LeO to review their handling of first tier complaints and address the root cause of client complaints. We encourage all practices to proactively consider training for staff that deal with complaints, and we are looking to develop joint training with LeO for the small number of firms with high levels of referrals  

The Complaints survey revealed that while complaint numbers are low per number of transactions, some firms are missing an opportunity to identify trends and areas for improvement with 39% of respondents rarely reviewing their complaints logs. Additionally, only 35% of practices provide regular training for complaint investigators, while 18% offer no training at all. In response, the CLC will offer training sessions at upcoming Roadshows and joint sessions with LeO in 2025 – look out for further details about the Roadshows planned for November 2024. 

The CLC is also planning a review of its Complaints Code and Guidance, focusing on proactive measures like client satisfaction monitoring to prevent matters escalating to a complaint. Meanwhile, practices are encouraged to review the current Complaints Code and Guidance and consider any necessary improvements to their complaint-handling processes.  

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