Too Many Snouts in the Bank Charges Trough

Some bank customers are understandably frustrated when it comes to refunds of what they regard as excessive charges. So the last thing they need is to pay needlessly to have their complaint resolved. Yet that is precisely what some customers are at risk of doing.

The Financial Ombudsman Service offers a financial services dispute resolution service that is free of charge to consumers. Thanks to some sensible increases in its remit, FOS can handle virtually all consumer financial services complaints these days, including those related to consumer credit.

True, the banks have diverted the specific issue of excessive overdraft charges to the courts, and are now dragging the whole process to the House of Lords. That means a long wait for most of the customers affected. But the Financial Ombudsman will still deal with complaints about overdraft fees for those customers in financial difficulty, and the delay doesn't affect complaints about other types of charges - like credit card default fees - which FOS is still handling.

So it's troublesome to see certain claims managers and law firms, advertising themselves as able to recover these charges for a fee, without any reference that I could see to the free service offered by the Financial Ombudsman Service. A bit rich from claims managers in particular, considering that they are responsible for 18% of claims referred to the Financial Ombudsman! Note, too, that in February 2008 there were 427 claims managers operating in the "financial products" space, with a total turnover of £68m - all additional cost and friction that the Financial Ombudsman is designed to avoid.

And watch out for the fine print. One claims manager debits its customer's credit card for all their "Service Charges" as soon as any amount of refund is obtained. Is it possible that a customer could owe more in service charges to the claims manager than the amount of the refund?

Time, you would've thought, for some joined up activity from the Ministry of Justice (which now regulates claims managers), the Office of Fair Trading (which regulates consumer credit) and the Solicitors Regulatory Authority (does what it says on the tin). These complaints should be resolved at minimum cost to the consumer. The best escalation path for any complaint should be from the bank's own complaints process to FOS. Heaven forbid the lawyers need to get involved, but we are here as a last resort. I don't see what value "claims managers" add in this sector.

The Evolution of Legal Services

Interesting coverage of Axiom's business model in The Lawyer this week. Flexible working infiltrates the Ivory Tower.

[See also subsequent coverage in the Wall Street Journal.]

Experienced specialist lawyers like the Axiom model because you get to earn good money consulting to some fantastic brands on big product launches, outsourcing deals, acquisition integration and so on. Great if you're looking for a new challenge but the "permanent" roles on offer don't light your fire.

In-house teams like someone with plenty of corporate experience to absorb the pain of servicing very demanding, one-off projects, rather than diverting the in-house team from business-as-usual or relying on a private practice lawyer who doesn't know the corporate processes and procedures.

Big law firms like the efficiency of dealing with a lawyer dedicated to a big transaction - especially where they have committed to fixed or capped fee arrangements. And it's an alternative career path for those who find the whole partnership thing a bit of a slog.

Of course, I should mention that I consult through Axiom.

You and Your Lawyer - Law 2.0

I'm enjoying Nick Holmes' digests of Richard Susskind's forthcoming missive on the future of legal services - a plea for innovation amidst the rising tide of super-normal law firm profits. You could be forgiven if images of King Canute wash into your mind at this point, but the nub of the IT aspect of Richard's thesis is that:

"...there is remarkable scope for greater and beneficial deployment of ... disruptive legal technologies [which] do not support or complement current legal practices. They challenge and replace them, in whole or in part... If lawyers are barely conversant with today's technologies, they have even less sense of how much progress in legal technology is likely in the coming 10 years."

Of course, Richard is wasting his time and effort when it comes to the very law firms who need to listen most. Enormous profits provide no incentive to innovate, except perhaps to cut the costs of current processes and figure out new excuses to hike hourly rates. None is really organised to innovate. The trend away from the pretence of partnership and chatter about who will list on the stock exchange reveals that their true intent, ironically, is to mirror the ethos of their best and biggest clients. Economies of scale and profits, not staff or clients, are paramount, the argument being that only huge profits allow adequate investment in staff and various hallmarks of quality. Like extra sculptures for the foyer.

True, clients do get resentful as rates soar, and the big ones bully firms into complex discount arrangements that sub-scale clients ultimately pay for. But that's merely a corporate game of cat-and-mouse, not seismic innovation.

No, the only participants in Law 2.0 are going to be relieved clients, the lawyers who solve their legal issues, and law firms that do no more than what is strictly necessary to facilitate the interaction between the two in order to solve those legal issues. In other words, lean, rather than obese, intermediaries.

I began working through Lawyers Direct two years ago to top-up my salary while working at Zopa, the person to person lending marketplace (in fairness to them, it was perhaps my stints at Reuters, DLA and GE that drove me to become a serial disruptor). Lawyers Direct offers access to more than 60 highly experienced lawyers at half what their City rates would have been. There is a fantastic but small support team in a small office in West London. The lawyers work wherever and whenever they please, linked by email and with the same sort of online tools and intranet that any self-respecting law firm should have. The reduced overhead means that even after the lower charge-out rate, the lawyers still have the opportunity to take home the same salary as some of their City counterparts (the ones who really do the work of solving legal issues).

Vaporised is the monolithic concrete tower with its vast, wasted common areas, sculptures, reception, private dining rooms, gym, library and hordes of support staff. There are neither billing targets nor the anxiety and temptation that goes with them. There are no partners, committees of partners, managing partners or senior partners.

All that's left is a compelling, lean and efficient business model for clients and lawyers alike.

List that, and I'll queue for the stock!