The CLC’s Estimates and Terms of Engagement Code requires you to state the fees and disbursements (plus any VAT) you propose to charge to your client and how fees for abortive work will be calculated. The purpose is to avoid any misunderstanding about the level of costs which will need to be paid and how they are made up.
Any expenses incurred by you which are not charged to the client at cost must be billed as fees, rather than disbursements. One example is a telegraphic transfer fee where the sum charged to the client is more than the direct cost charged by the bank to the practice. These are described as ‘profit costs’.
A number of lenders now charge an annual panel management fee to practices to offset the cost of managing those panels. The CLC considers that those charges are an overhead for the practice. Some panels are now introducing a fee per transaction. Provided the client has been advised as soon as it becomes apparent that the charge is to be incurred, it is acceptable for that charge to be passed on to the client as an expense (and therefore charged as part of the profit costs due to the practice). However, the CLC’s view is that this charge is not a liability incurred to a third party on behalf of a Client and therefore should not be charged to the client as a disbursement.
From 1st October 2015 all regulated law firms will need to take additional action in order to comply with an EU Directive on Consumer Alternative Dispute Resolution.
In addition to signposting all clients to the Legal Ombudsman in relation to any service complaints you will also need to provide information about entities that provide Alternative Dispute Resolution services.
In summary, from 1st October 2015 you must;
- continue to provide information about the Legal Ombudsman as set out in the CLC’s Complaints Code ,
- provide information about an additional ADR entity which has been certified under the EU Consumer ADR Directive (there is no requirement to use such a scheme and information about the scheme need only be provided at the end of the complaints process).
The Department for Business, Innovation and Skills has confirmed that the following ADR entities are available to deal with disputes in the legal services sector: Ombudsman Services, ProMediate and Small Claims Mediation.
See our list of Frequently Asked Questions below
See the DRAFT amendments to the CLC Complaints Code and Guidance
More information about the EU Consumer ADR Directive and requirements for firms is on the Trading Standards website.
The Legal Ombudsman (LeO) is currently consulting on its plans to become an approved provider of Alternative Dispute Resolution. We will update you on those plans as they develop.
EU Consumer ADR Directive FAQs
FAQ1: What is the EU Consumer ADR Directive?
A: The ADR Directive requires all traders, including legal service providers, to provide information about complaints providers who have been approved by Trading Standards website
FAQ2: When does EU Consumer ADR Directive come into force?
A: 1 October 2015
FAQ3: Why does it affect me?
A: It had been hoped that the Legal Ombudsman would be recognised as a complaints provider with effect from 1 October 2015. Because the Legal Ombudsman has delayed making that application, all legal practices are required to provide information about recognised complaints providers.
FAQ4: What do I need to do?
A: You should comply with the CLC’s draft amended Complaints Code and Guidance (attached) which explains the nature of the information you need to provide and at what stage in the complaints process.
FAQ5: Are there any other EU Directives which are likely to affect the way in which I manage complaints?
A: The EU Regulation on Consumer Online Dispute Resolution (ODR) comes into force on 1 January 2016. This sets out further information which legal services providers will need to supply if they are ‘online traders’. The extent of that information will depend whether the Legal Ombudsman is recognised as a complaints provider. The CLC will provide further information about the steps needed to ensure compliance over the coming weeks.
FAQ6: Where can I find further information about the EU Consumer ADR Directive?
A: For more information on the EU Consumer ADR Directive and requirements for practices, visit the Trading Standards website.
 An online trader is defined as, 'a trader who intends to enter into online sales contracts or online service contracts with consumers'