LSB rules out ban on referral fees

The Legal Services Board (LSB) has confirmed that it does not back reinstating the ban on referral fees but suggested that instead all agreements between lawyers and their introducers should be made public
The LSB said today that there is insufficient evidence to make the case for a ban, but that transparency and disclosure need to be improved. It also said there should be the same rules for the different parts of the regulated legal market so far as possible. The board says legal providers should disclose to their clients to whom the referral fee is paid, for what services, and the value of the fee. They should also be obliged to tell the consumer that they have the right to shop around for an alternative legal services provider. In addition, the LSB proposes that approved regulators should collect and publish all agreements between introducers and lawyers. A consultation paper issued today reflects the LSB’s preliminary findings and states these are not definitive.
The recommendation that all agreements should be published by the regulators is bound to be highly controversial, and the consultation said it wanted views on whether it would raise issues in relation to commercial confidentiality.
The consultation, which runs for 12 weeks, is informed by evidence from the LSB’s consumer panel and economic evidence. The consumer panel previously found that there was insufficient evidence to suggest that the independence of lawyers is being compromised by the existence of referral fees and suggested the fees have actually widened access to justice.
In his introduction to the consultation, LSB chief executive Chris Kenny said: “Our scrutiny has been focused on the regulatory treatment of referral fees, assessed against the regulatory objectives set out in section 1 of the Legal Services Act 2007. We do not offer a view on any wider public policy arguments for their retention or abolition. The view of our consumer panel, can be summarised in their conclusion of ‘reveal, regulate, so retain’. The panel argue that the last element depends on the delivery of the first two, which are of equal importance. The board broadly believes that this provides a clear basis for further discussion. Our preliminary hypothesis is that the simple solutions of an outright ban or a laissez faire free for all are both unacceptable”. He said a ban would be “a wholly disproportionate action when the economic evidence is that consumers do not suffer detriment from the existence of referral fees and, indeed, that there may even be access to justice benefits from their retention”.
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