There has been no evidence of a lack of transparency around either conditional fee or damages-based agreements, the Legal Ombudsman (LeO) has reported.
In January 2014, LeO expressed concern about the use of ‘no win, no fee’ agreements and the risk that their use could cause consumer detriment.
However, in a report published this week, it said that since then “the Legal Ombudsman has not seen any issues around DBAs or ‘no win, no fee’ funding methods”.
At the same time, it encouraged the Legal Services Board as the oversight regulator “to continue to monitor and review” their use.
Of the 4,307 complaints accepted by LeO between 1 June 2014 and 31 January 2015, 26% of them (1,097) related to a lack of transparency in pricing but only 52 complaints were related to CFAs and just one complaint arose from a DBA.
However, litigation more generally accounted for 152 of the complaints, putting it behind family law (257) and wills and probate (156) – areas LeO said where consumers were “often at their most vulnerable”. There were 64 complaints about personal injury cases.
LeO suggested that firms give clients a range of prices, for example in a litigation case, depending on whether the case was resolved by early settlement, mediation or at trial, to ensure clients had a “best and worst case scenario”.
It said there was “evidence of some lawyers failing to make clear to consumers the financial risks that come with entering into a ‘no win, no fee’ agreement”.
LeO urged lawyers to keep clients regularly informed of increasing costs and also expressed concern about “the transfer of risk”. It explained: “There is a structural weakness in the nature of the agreements which allow some lawyers to pass the risk of unrecovered costs to the consumer. For example, the consumer can still be liable for their own lawyer’s costs if they are not able to obtain damages from the other side.”
The Legal Services Board – for whom the report was produced – agreed with LeO’s conclusions on lack of transparency. The super-regulator said it would be writing to legal regulators to highlight the report’s findings and “remind them of our expectation that they monitor developments in the area of price transparency” to ensure good outcomes.