Consumer panel attacks CLC over plans to halve compensation grants

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8 April 2015

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Panel: no evidence the changes would lead to cheaper conveyancing

The Legal Services Consumer Panel has strongly attacked plans by the Council for Licensed Conveyancers (CLC) to cut the size of grants from its compensation fund from £1m to £500,000 – a quarter of the amount clients of solicitors can claim.

The panel said licensed conveyancers operated in “some of the highest risk areas of law relating to misuse of client money” and the CLC had offered no “rationale, analysis or quantification of benefits and costs” for the change.

The panel warned that the move would create “an even wider disparity” in levels of protection between conveyancers regulated by the CLC and those regulated by the Solicitors Regulation Authority (SRA).

Responding to a CLC consultation, the panel said it appreciated that the cost of regulation fed through to prices paid by consumers, leading it to make “pragmatic choices on difficult policy issues”.

However, as with the SRA’s indemnity insurance reforms, the panel said there was no evidence that reducing consumer protection would lead to “equivalent gains”, such as lower prices.

The changes planned by the CLC include a maximum limit for grants of £500,000 per claim and £2m for multiple claims, combined with a limit of six months to make a claim. The SRA’s current limit is a year.

The panel called for the CLC to produce information about the number and distribution of compensation awards, along with performance data on speed of payment.

“Consumers cannot be expected to assess the integrity of practitioners and have little sight or control over how their money is managed. Further, we note recent cases involving CLC practitioners where the scale of claims far exceeds the proposed limit.

“The CLC’s most recent annual report notes a judicial review when the CLC was ordered to reconsider three claims totalling £2.7m, plus two further interventions where clients suffered losses of £1.3m and £2.9m.”

The CLC responded by arguing that comparisons with the SRA were misleading because of the differences in the “risk profiles” of the two organisations.

“The proposal to reduce the cap for a single grant to £500,000 is based on the historic trend of grants applied for, which have never reached that level,” a spokesman for the CLC said.

“We have proposed the cap as a way of continuing to secure effective consumer protection without placing disproportionate burdens on the regulated community.

“Any comparison with the SRA’s fund is misleading as the two funds exist in response to the very different risk profiles of the communities that the CLC and SRA regulate. We will publish the outcome of the consultation in due course.”

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