Consumers struggle with legal products

Consumers are finding some legal products confusing and complex and often struggle to understand them, according to a legal watchdog.

The problem could damage the high reputation of the legal profession as well as causing problems for consumers, according to the Legal Ombudsman.

Chief Legal Ombudsman Adam Sampson warned consumers to be more vigilant over the products being sold to them to avoid problems.

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“Consumers have a responsibility to protect themselves and apply the due diligence when sourcing legal products. Check the small print, shop around and make sure you know exactly what you are buying,” he said.

Writing in the latest Legal Ombudsman annual report, Mr Sampson gave examples where customers brought their complaint to the organisation after losing money on unrealistic ‘no win, no fee’ promises, dubious fixed-fee services and confusing legal insurance policies.

He cited the example of how the mis-selling of complicated products such as Payment Protection Insurance damaged the financial sector’s reputation, and acknowledged it could be disastrous if the legal sector was to follow suit.

A YouGov survey commissioned by the Legal Ombudsman revealed that nearly three quarters (74 per cent) of people didn’t know or were unsure what financial cover their legal expenses insurance policy provided. And 89 per cent of them didn’t know or were unsure which legal services were excluded under the terms and conditions of the policy, which the Ombudsman described as “staggering”.

Case studies from the report showed the experiences of customers left in a financial mess by mis-sold divorce packages, will writing software and conditional fee arrangements.

They include the case of Eileen Dunn from Leicester who was told to pay a firm £15,000 for a personal injury case that never made it to court, despite instructing them on a supposed ‘no win, no fee’ basis. The firm was ordered to waive its fees by the Ombudsman.

In another case, a woman engaged a solicitor to execute her late husband’s will at a charge of one per cent of the estate, but when the will was executed two years later the woman found she had been overcharged and the cheque the solicitor sent for the reduced amount bounced.

The solicitor promised to send her a further cheque to cover the difference, but that cheque was not forthcoming.

When she contacted the solicitor, she was told that the solicitor had ‘run away and misappropriated client funds’ and that there was nothing left in her client account.

He said the company’s indemnity insurance had run out. The Ombudsman is only allowed to award up to £30,000, less than she was owed, so she was referred to the Solicitors Regulation Authority to make an application to its compensation fund.

In another case, a man and three of his neighbours engaged a solicitor to help in a planning matter for a fixed fee. But when the bill arrived it was for £400 more than had been agreed.

He took the complaint to the Ombudsman which found that although extra work had been done the man had not given his permission for this work, so the additional charges should be waived.

Mr Sampson said: “The arrival of new commercial products is generally to be celebrated as it makes legal services more affordable.

“However, we’ve seen the damage done to the reputation of the financial sector by the mis-selling of complicated products.

“The Payment Protection Insurance scandal has cost the banking industry billions of pounds. It would be disastrous if the legal sector exposed itself to a similar risk.

The Law Society, which represents solicitors agreed with the Legal Ombudsman’s point of view that there are many ‘Before the Event’ insurance packages that are inadequate and lack clarity in what the client can achieve.

A spokesperson said: “Such packages will be increasingly important in the post-Legal Aid, Sentencing and Punishment of Offenders Act world and it is crucial that the insurance industry and the Financial Services Authority should look at these concerns.

“We agree that it is essential that solicitors should explain clearly to clients what their liability is likely to be. We will be studying the report to see whether there are lessons that the society can take forward to assist its members.

“Many of the terms of the insurance policies referred to in the report will be out of the control of the solicitors.”