Continuing concern over the potential for mis-selling damages-based agreements (DBAs) has led the Legal Services Board (LSB) to order the Legal Ombudsman (LeO) to monitor the complaints it receives in relation to them.
The LSB has issued a demand under section 120 of the Legal Services Act 2007 that LeO provide reports over the next two years.
The move follows an LSB decision  not to publish formal guidance on DBAs for the frontline regulators, but it told them to monitor “developments in the area of price transparency in general and transparency of DBAs in particular”.
The LSB has doubts  about the ability of unsophisticated consumers to choose and use DBAs or compare different DBAs.
In a letter to LeO chairman Elizabeth France this week, LSB chief executive Chris Kenny noted that the ombudsman has previously highlighted consumer confusion with what is covered by legal expenses insurance policies and a general lack of transparency about the cost of lawyers’ services.
LeO has also suggested that the introduction of DBAs may result in further consumer confusion. “We share this concern,” said Mr Kenny.
“The board believe that along with yourselves and the approved regulators, we should remain cognisant of the risks posed by DBAs and the potential for the use of such funding arrangements to increase.”
The formal request under section 120 is broader than just DBAs, and requires LeO to provide an interim report by 1 June 2014 with an assessment of the number and proportion of all complaints which concern a perceived lack of price transparency, broken down by type of funding arrangement used, type of consumer complaining, type of professional being complained about and the area of law.
The LSB said the report should also look at whether there are any common features of the business models involved and “the extent to which the ombudsman believes that this confusion may be being deliberately fostered”. The final report is to be delivered by 1 April 2015.