Important changes to Legal Ombudsman Scheme Rules from 1 April 2023
In our June and November editions, we confirmed the Legal Ombudsman (LeO) had published a recovery plan to address the lengthy delays that consumers faced when making complaints. LeO carried out a review of its Scheme Rules to try to enhance its operational efficiency.
On 28 October 2022, LeO confirmed it will be implementing significant changes to its Scheme Rules, coming into effect on 1 April 2023 (see here a link to the changes). The three main changes are outlined below.
Scheme Rule 4: Time Limits for referring a complaint
The most eye-catching change is the time limit for referring a complaint. Currently the relevant time limit is six years from the date of the act or omission being complained of or within three years of when the complainant should have realised there was cause for a complaint. The new time limit under the amended Scheme Rules is one year, from the act/omission or from the time the complainant should have realised there was cause. This is a big departure and could be perceived by consumers as being too 'firm-friendly'. However, LeO has confirmed it will retain a power under Rule 4.7 to extend the one-year time limit within its discretion. It remains to be seen whether the time limit will have teeth as LeO has not yet given any guidance on how it will exercise this discretion. LeO has, however, confirmed it will publish guidance explaining the time limits and its powers at a later date. Watch this space for developments.
Firms will need to ensure that all communications to clients reflect the new changes.
Scheme Rule 5.7 (Ombudsman discretion to discontinue or dismiss a complaint)
The next change is in respect of Rule 5.7, which currently details from (a) to (n) the Ombudsman's discretion to discontinue or dismiss a complaint. These changes to Rule 5.7 are three-fold: the first is in respect of (b) with the introduction of the word 'significant' to 'the complainant has not suffered (and is unlikely to suffer) financial loss, distress, inconvenience or other detriment'. The aim behind this amendment is to allow the Ombudsman to decide what is a proportionate use of its resource and time, i.e. not to waste time on minor issues. The Ombudsman confirms this discretion is to be exercised after the parties have made submissions as to why the complaint should/should not be dismissed.
The second amendment is to introduce (p), which allows the Ombudsman to consider whether, in light of its size and complexity, it is disproportionate for the complaint to be investigated. Whilst LeO has stated this power will only apply to a 'very small proportion of cases', it will again be supplying guidance and more information in due course on how it will be exercised.
The final change is the introduction of (q), which states that new issues will not be permitted in ongoing investigations. This change is designed to ensure that the complaint is formalised at the outset and parties cannot 'deliberately protract or delay investigations'.
Scheme Rule 5.19 (Escalation of cases to an Ombudsman for decision)
The final important change is to Rule 5.19. This change is aimed at reducing the number of complaints put before the Ombudsman for final decision. If no substantive issues are raised by the parties in reply to the findings or remedies by the investigator, the complaint can be 'resolved' on the basis of those findings/remedies.
The Ombudsman has confirmed that it will still give final decisions on cases where it is necessary to do so, even if no substantive issues have been raised by the parties. The examples given as to when this will be necessary are: (i) where there are 'vulnerability issues'; or (ii) where the final decision itself is needed in order to claim against run-off insurers of the firm.
It remains to be seen whether these changes will have the impact LeO is hoping for in dealing with the vast backlog of complaints and future complaints – the time limit change should reduce the number of complaints that go to LeO but not if the discretion is used too often. Firms will need to pay close attention to any guidance published by LeO detailing when and how its new extended powers can be exercised.
In the meantime, firms should make sure all their communications are amended to reflect the new change to the time limits by 1 April 2023 when the new Rules come into force, as well as making sure they read the full announcement detailing the additional changes.