Recent findings by a YouGov poll, commissioned by the Legal Services Board and published on 9 June 2011, reveal how many law firms may not be complying with their regulatory obligations, to inform their clients of their internal complaints- handling processes and their right to complain to the Legal Ombudsman.

Even more shocking, is the revelation that firms have been charging clients for investigating their complaints. This shows an overwhelming lack of awareness among a few and this needs to be addressed urgently to preserve the integrity of the legal profession.

With the Legal Ombudsman having been established for over six months and the introduction of outcomes-focused regulation and alternative business structures (ABSs), it is more important now than ever before that you have an effective complaints-handling mechanism in place.

Any disregard to these important changes can prove to be fatal to a firm, in terms of cost, time and reputation. So it is worth looking at each of these changes and how they may affect firms.

The Legal OmbudsmanSince 6 October 2010, the Legal Ombudsman took over the handling of investigating complaints about the legal profession.

Focusing on solicitors for a moment, and their former regulator, the Legal Complaints Service, we saw that the profession were only charged the costs of the investigation where the complaints were upheld against them by an adjudicator. This is where the ombudsman differs. Firms would now be liable to pay the £400 case fee after the first two cases in a rolling year, regardless of whether the complaint against it was upheld, if the ombudsman was to decide that all reasonable steps were not taken to resolve the complaint in-house.

This places a heavy burden on a firm. For example, in the case of a vexatious complainant, where a firm can prove to have provided a perfectly reasonable level of service, it could still be charged the fixed sum of £400 simply because the complaints-handling process was deemed to be insufficient.

While on the subject of the Legal Ombudsman, it is worth highlighting some further changes to be aware of: firms are expected to see a complaint through to conclusion within eight weeks, after which point the ombudsman will become involved.

The timelimit for raising a complaint with the ombudsman from the date of knowledge of the issues giving rise to the complaint, has been extended from six months to 12 months,

And the maximum award of compensation a firm could be directed to pay has been raised from £15,000 to £30,000. These changes mean that it is crucial that complaints are resolved quickly and effectively before they can escalate to the new regulator.

Outcomes-focused regulationThe Solicitors Regulation Authority (SRA) is transforming its approach to regulation. The emphasis is on moving away from investigating specific breaches of the rules, towards a more risk-based approach; giving you full autonomy on how your firm and its processes are implemented, in order to achieve the right outcomes for your client.

What does this mean for firms, and what impact does it have on their complaints-handling process?

Under the new regulatory framework, there will be 10 core principles, of which the relevant ones to complaints handling are: acting with integrity (principle 2); acting in the best interests of each client (principle 4); providing a proper standard of service to clients (principle 5); and complying with legal and regulatory obligations and dealing with regulators and ombudsmen in an open, timely and cooperative manner (principle 7). When a firm receives a complaint, it must have these four principles very much in mind.

There is no written guidance to assist a firm in achieving the best outcome for the customer; the onus is entirely on the firm. How then can one assess, whether firm procedure is in line with what the Legal Ombudsman considers to be reasonable and effective and avoid payment of the £400 case fee? Is this to say that payment of the case fee is almost inevitable wherever a complaint cannot be resolved in-house?

Alternative business structuresWith the uncertainty surrounding the regulation of ABSs, they are still a reality and firms will inevitably feel their impact. With them, comes the growing pressure on small to medium traditional firms to meet the challenges and to ‘keep their head above water’, so to speak. These new ABSs will most likely emanate from a recognised brand and already have a highly regarded and well established reputation. The question to ask therefore is, how can the firm remain competitive in today’s market?

By ensuring that it has effective processes in place, a firm can guarantee returned custom. Its clients are the future of the practice. A satisfied customer might recommend up to five new clients, but a dissatisfied customer can lose the practice up to 23. Firms should therefore adopt a client-focused approach, and show your commitment to client care and to resolving complaints.

Is there more?Yes there is. The harsh reality is that the profession will always face changing demands and challenges to ensure that their clients’ interests are made a priority. The trick is to stay ahead of the game.

Consultations are under way and the possibility that complaints records will be published is becoming ever more real. While the Legal Ombudsman has postponed making a decision on whether to name law firms on the receiving end of complaints, now is the time to act. By ensuring that complaints are managed now, firms can ensure that processes are in place by the time a decision has been made, as to whether or not complaints records will be published.

It is evident that the demands and challenges facing firms are growing rapidly and the onus on you is greater than ever before, if you want to enhance your reputation and remain competitive.

Raj Tutt and Leila Chaudry are former caseworkers of the Legal Complaints Service, and are the founders of Resolve Consultancy Limited.