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Consumers warned on dubious legal services - July-19-12
Source: The Times - Law
People are losing money on ‘no win, no fee’ promises, dubious fixed-fee services and confusing legal insurance products
The public has been warned to be more vigilant after a series of cases in which clients were sold complex and confusing legal services and products.
The warning has come from Adam Sampson, the Chief Legal Ombudsman, who says that the problems exposed risk damaging the high reputation of the legal profession.
His latest annual report highlights a series of cases in which people complained to his office after losing money on unrealistic “no win, no fee” promises, dubious fixed-fee services and confusing legal insurance products.
A YouGov survey commissioned by his office found that nearly 75 per cent of people did not know or were unsure what financial cover their legal expenses insurance cover provided. And 89 per cent did not know or were unsure what legal services were excluded under the policy’s small print.
Real-life case studies also found people left in a financial mess by mis-sold divorce packages, will-writing software and “no win, no fee” deals.
No win, no fee
One woman, Eileen Dunn, from Leicester,was told to pay a firm £15,000 for a personal injury case that never made it to court, even though she instructed them on a “no win, no fee” basis.
The Ombudsman made the firm waive its charges. Ms Dunn said: “I don’t know what I would have done if the Legal Ombudsman hadn’t been there. The firm led me along in the belief I had a legitimate case, changed their minds at the last moment, saying it wouldn’t stand up in court, and then tried to bully me into paying £15,000.”
“If they had said from the start I didn’t have a case I wouldn’t have pursued it.”
At present the Ombudsman’s policy is to leave it to individuals as to whether to name the firm in question. A spokesman said: “In this particular case, Ms Dunn has been through quite a bit with this firm and so she did not want to name them.”
The report comes after the Ombudsman’s first year of operation. The office, which cost £17.3 million, received about 75,000 inquiries, which translated into some 8,400 cases for investigation, most of which were resolved informally.
Most complaints related to family law, residential conveyancing and wills and probate. But there was also a “substantial” number relating to personal injury, employment and crime.
The Ombudsman has power to require the lawyer to apologise, to return documents, do remedial work, reduce or refund fees or pay compensation if the complainant lost out or was badly treated. He can also award up to £30,000 but the most common amount in the last quarter of the year was £299 or less.
The report says that the story of British legal services so far has “been one of success”, built on a reputation for quality and probity which, Sampson says, is “unrivalled.”
So the cases highlighted are “very much the minority” and when mistakes are made, they are usually “honest mistakes.” He says: “Often, the lawyer tries to put the mistake right. If they do that, we’ll usually say that they don’t need to do anything more.”
In one “rare” case of dishonesty, a woman was overcharged for the execution of her late husband’s will. When she collected the cheque for the estate, she found she had been overcharged. The solicitor promised a further cheque for the difference but it was never arrived and the first cheque for £65,000 bounced.
When she contacted the firm she found that the lawyer involved had made off with the money. As her loss exceeded the £30,000 that the Ombudsman could award, she was referred to the Solicitors Regulation Authority to apply for compensation from their compensation fund.
The state of the economy has fuelled a rise in cases where the law firms do not have the funds to meet their obligations and complainants have to be helped to obtain redress through insurance or approved compensation schemes.
In another case, Mr E instructed solicitors with the sale of his home. The sale went through and the statement of fees showed the estate agent’s fees had been deducted from the sale proceeds.
Later, he received a letter from the estate agents, saying the fees were still outstanding — it turned out that the solicitor had not paid the estate agents at all. The Ombudsman decided he was owed almost £2000 to compensate for the fees owed to the estate agents plus £200 for the shock of finding he owed the money.
But the solicitor had gone out of business so his information was sent to the solicitor’s indemnity insurers so that he could obtain compensation from them.
Other cases exposed failings to explain the full extent of likely fees and a lack of information between solicitor and client as to how long a case would take. Price competition, the Ombudsman said, was to be encouraged. But he warned that a watch must be kept, to ensure that “cheap and cheerful” tends towards “cheap and shoddy.”
Again, commoditised legal services — in which legal transactions are broken down into components, enabling some parts to be done other than “by expensive lawyers” — are welcome, he says. But such services carry a risk. Mostly one conveyance does look like another. But they do not always; and systems must be able to identify when something is not routine.
Off-the-shelf divorce package
Mrs I bought an off-the-shelf divorce package from a firm over the phone. A case manager called her from the firm and went through her details. But he then told her that because she was estranged from her husband and had no address for him, the case might not be straightforward and there was no guarantee that the standard divorce petition she had paid for would work.
She asked for a refund but despite several calls the firm did not respond. The Ombudsman ordered the firm to repay her.
Another problem with such services is that they limit the involvement of expensive qualified lawyers — and so for the most part, people are dealing with computerised systems or relatively unqualified staff.
In one case, a couple paid nearly £3000 to a firm of will writers and estate planners to prepare wills and documents for them. When he received them, they were incomplete, poorly typed and contained errors. The firm offered compensation but would not return his money. He then learned that it had outsourced the work to another firm.
The Ombudsman looked into it but in this case was unable to help as no lawyers were actually involved. The documents had been drafted by an administrator using legal software.
The case shows how economic pressure, price competition and commoditisation “all present risks to the reputation of legal services”, the Ombudsman concludes. Meanwhile, people worry about how they will pay for legal services at all — and have little idea what their legal insurance cover will pay for.
This week the Legal Services Board, the profession’s regulator, published research showing a high level of consumer confidence with the overall service provided by solicitors and other lawyers.
Lucy Scott-Moncrieff, president of the Law Society, said the findings showed “that people can have confidence in solicitors and the quality of their advice. We believe that, in the light of this and the recent Legal Services Consumer Panel survey, the Legal Services Board should be celebrating the service provided by lawyers.
She added: “The legal services market is complex, with many different types of provider operating, some of whom are unregulated. The underlying message from this survey is that it is important to identify the right legal service provider to guarantee good service and customer satisfaction, as well as the protections that come with using a solicitor for the consumer.”
It is too soon to say what impact the changes in the legal services market will have on lawyers’ professional ethics, the Ombudsman concludes. But judging by experience from New South Wales, where multi-disciplinary and incorporated practices were introduced in 2004, they posed danger — thanks to regulation by their Legal Services Commissioner.
The new legal landscape will see more legal products and different ways of offering legal services. That is generally to be celebrated, as it reduces the cost of legal services for most people, the Ombudsman says.
But he sounds a note of warning, citing the “scandal” of Payment Protection Insurance, which had “cost the banking industry billions of pounds.” “It would be disastrous,” he says, if the legal sector exposed itself to a similar risk.
As for consumers, they must check their small print.
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