CMA responses: Law Society and SRA at odds, but McKenzie Friends are happy

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16 December 2016


Paraskeva: LSB should take action

Paraskeva: LSB should take action

The Competition and Market Authority’s (CMA) report on legal services yesterday provoked a predictably mixed response that pitted the Law Society against the Solicitors Regulation Authority, and found support from the body representing paid McKenzie Friends.

Meanwhile, the Council for Licensed Conveyancers said the call for a review of legal regulation was unnecessary and that the Legal Services Board should use its powers to force regulatory independence to happen.

A Ministry of Justice spokesman, said: “We welcome the CMA’s work in this important area. The report makes a number of thoughtful recommendations and covers a broad range of legal services, which we will respond to in due course.”

Legal Services Board (LSB) chairman Sir Michael Pitt said: “The conclusions [the CMA] reaches align with our own which is that the legal services is not working well enough for consumers and small businesses and that the current regulatory framework is unsustainable in the long run.

“The recommendations of this important report are intended to be a catalyst for changes to support consumers and small businesses in making informed choices – and in galvanising a step-change in the legal services sector’s competitiveness.

“The dual focus on market transparency and structural reform is essential. In particular we are pleased that there are recommendations to the Ministry of Justice for action on regulatory independence and the need for wider reform of the Legal Services Act. These are central elements of our own vision for the future of legal services regulation, as we set out earlier this year.”

The Legal Services Consumer Panel called on the regulators and the LSB to respond by “showing further leadership in addressing widespread transparency failings” which were highlighted in its Open Data report in February.

Panel chair Elisabeth Davies said: “The problems identified are not new and have been at the heart of the panel’s work and remit. Although there has been some progress over the years, the pace of change has been slow – too slow for regulators to be comfortable with. The CMA’s review must now provide the catalyst for advancement.

“The remedies proposed will require tenacity, drive and focus from the regulators and the oversight regulator. Solutions will not always be universally popular, welcomed, or straightforward. Regulators must therefore invest time and effort in understanding the challenges from both the consumer and provider perspective, and the oversight regulator must be robust in its support and challenge.”

On to solicitors. The Solicitors Regulation Authority said the report gave “impetus” to its own planned changes. Chief executive Paul Philip said “I am pleased that the CMA has strongly endorsed our reform proposals , which will help to tackle unmet need and support members of the public and small businesses to access legal services.

“The report makes a good case for regulation that is independent of both representation and government, echoing the SRA view that independent regulation is key for public confidence and will help increase public trust in the sector.”

But the Law Society warned that a desire for greater competition and deregulation must not be allowed to undermine consumer protection.

President Robert Bourns said: “The CMA’s decision not to conduct a market investigation into the legal sector is welcome.

“However it is astonishing that some of the CMA’s recommendations prioritise deregulation over consumer protection.

“If solicitors were to offer legal services from unregulated companies as suggested by the CMA, then their clients would no longer enjoy a raft of protections – from confidentiality to compensation – offered by every solicitor in a solicitor firm. These deregulatory changes would undermine consumer protections and erode trust in the legal system.”

He said that 77% of consumers said the businesses in which solicitors work should be regulated when surveyed by the Law Society in 2016; 97% said that advice from a solicitor should be confidential and not disclosable to third parties.

“The Law Society has a responsibility to make sure that the legal sector works in the best interests of each one of us – regardless of wealth, ethnicity or gender. Our concerns are wider than the CMA’s.”

Mr Bourns said regulation could be a “blunt instrument” and that, where possible, solutions driven by consumer demand were more flexible and less costly than regulation.

He reiterated the society’s argument that with the UK facing Brexit, this was not the time to revisit the regulatory regime.

The Council for Licensed Conveyancers said it was shortly to issue consultations on increasing the transparency of prices and how consumers could be helped to compare providers. It also noted that this year it cut the cost of practising as a licensed conveyancer by 20%.

It continued that the “widely understood and serious concerns about the lack of independence of some front line regulators that are part of larger representative bodies require more practical and immediate action than a review by the MoJ”.

It said the LSB has powers from the Legal Services Act 2007 that allow it to take action to secure independent regulation and it should now use those powers – these include removing recognition from, say, the Law Society as an approved regulator, and giving instead to the SRA.

Council chair Dame Janet Paraskeva said: “We are grateful to the CMA for moving forward the conversation on price and service transparency and comparison…

“We are also pleased that the CMA shares our view of the need for a review of the scope of legal services regulation and a move to a more rational, risk-based approach…

“Before we can move forward, though, it is vital that the other frontline regulators of legal services enjoy the same regulatory independence that we do. That is in the public and consumer interest. The CMA recommends the MoJ undertake a review of independence, but this is unnecessary in our view. The LSB has powers to secure independent regulation. Its chair has publicly acknowledged the case for action, as the CMA now does.

“With the government under a great deal of pressure on other fronts, we urge the LSB to take action now to establish regulation independent of representation and so continue the process of reform to fulfil the purpose of the Legal Services Act. To do so would be a profound and fundamental step that would increase public and consumer confidence in the legal professions.”

The Society of Professional McKenzie Friends said it hoped the report would “lay to rest once and for all the Judicial Executive Board’s proposed blanket ban on professional McKenzie Friends”.

It said: “The report acknowledges that paid McKenzie Friends ‘may provide an important service to the vulnerable and those who cannot afford to instruct a solicitor or barrister’ and ‘the proportionality of a blanket ban needs to be assessed carefully given its likely impact on consumer choice’.”

Further, it said that “the evidence that we have reviewed is mixed but does not suggest that there are significant quality issues relating to the use of McKenzie Friends”.

The society said: “We hope that all will now accept the previous recommendation of LSB and Legal Services Consumer Panel, that self-regulation is the way forward. LSB regulation would drive up cost; a blanket ban would remove the option altogether.”

The Chartered Institute of Legal Executives (CILEx) described the report as “a reminder of how far we have come to open up the legal services market, and of how much further we have to go…

“There remains scope for the CMA to better explore the options afforded by the business models of other providers, such as chartered legal executives, and their capacity to ameliorate some of the problems highlighted in the report.”

CILEx said it favoured a “holistic review” of legal regulatory framework. “However, it is a complex and balanced system and the MoJ may be better advised to do that over the medium term rather than tinker piecemeal with certain elements in isolation, such as the independence of the regulators.

“That said, from a CILEx perspective, the frontline regulator is, to all intents and purposes, already independent and CILEx is ready to engage in exploration of the next stage of the evolution of that independence.”

CILEx Regulation said it was clear that “more can be done to raise awareness with legal service providers of the customer journey, from first identifying a legal need to seeking feedback through reviews and recommendations”.

It added: “There is further discussion to be had about quality marks and client protection arrangements. It will be important to understand how consumers are able to distinguish between accreditations and quality marks as part of their decision-making process and what they understand about the level of protection that may be afforded to them.

“We are happy to explore the feasibility of a single digital register with other regulators, which could in time replace the existing data sharing arrangements that are in place.”

Peter James, head of regulatory policy at the Institute of Chartered Accountants in England and Wales, said: “An important part of opening up the legal services market is making it more accessible to the consumer.

“It is disappointing therefore that while the CMA has talked about transparency of pricing, service and quality there is little attempt to define what these look like, what ‘good’ might look like, and on quality it appears to be a race to the bottom rather than an effort to improve it.

“The outcomes sought seem to be enablers rather than an end game of a stronger more effective diverse market.”

Bar Standards Board director general, Dr Vanessa Davies, said: “Improving access to justice, promoting the interests of consumers and promoting competition in the provision of legal services are key objectives for all legal regulators. The Bar Standards Board welcomes the CMA’s report and looks forward to working with them and other legal regulators to take forward their recommendations.”

 

Matthew Briggs, CEO of legal comparison website The Law Superstore, said: “We support the CMA wholeheartedly in driving change in the legal profession. These figures show that we are a long way from consumers getting access to the right support, at a fair price and that needs to change. Why should the British public continue to miss out?

“There are many progressive firms who are already being clear and transparent about costs and service levels. As the CMA concludes, these leaders show things can be done differently and better. We believe consumers have the right to understand how much a straightforward legal service should cost and what they will get for the money they spend.”

The majority (80%) of consumers polled by The Law Superstore were in support of legal firms displaying their prices on their website. Just 20% felt that the services they were buying were so complex they could only be quoted following a conversation with a law firm.

When asked what they were looking for from a legal firm the highest score was value for money (51%), which compares to just 21% who are looking for lowest price.

Mr Briggs said: “We live in a market economy where digital-savvy consumers have benefited from greater competition when buying financial services, financial advice and utilities. We don’t think legal services should be any different.”

Qamar Anwar, managing director of marketing collective First4Lawyers, said: “As we said in our report, For whom the bell tolls: the customer service imperative, law firms should be no different from other service providers in terms of making it easier for consumers to compare price, product and service.

“The legal services market must answer this wake-up call and quickly step up to the challenge. The disruptors are already out there and if firms don’t act quickly, they will be left wondering who has eaten their breakfast as their clients move in droves to other providers who quickly embrace change.”

“Thanks to the CMA report, the public should see changes emerge before the end of 2017.

“In our report, we said that firms wanting to win the race for customer service would need to address the key challenges of offering a fully-automated online capability; accepting that comparison websites will be the norm; recognising that the client manages the customer journey; seeing that big data will drive everything; and collaboration with others. Those firms who don’t accept the challenges will quickly find that they are left behind in the race for clients.”



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