13 July 2012

Consumer panel: lift ban on law centres and other not-for-profit advisers charging for work

The ban on law centres and other not-for-profit (NFP) organisations charging for advice should be lifted as part of plans to bring them into the alternative business structure (ABS) regime, the Legal Services Consumer Panel has said.

Backing Legal Services Board (LSB) recommendations to overturn the current ban, it said that given the Charity Commission allows charities to trade, “it would seem odd if a licensing authority decided to ban non-commercial bodies from charging for advice unless there were good reasons specific to legal services to do so. We are not aware of any specific reasons to justify a prohibition on charging.”

It noted that the Charity Commission is still likely to require the charity to meet its wider aims of providing public benefit regardless of a person’s means to pay, such as having a legal information website.

The panel said the current prohibition is “a legacy of a historic deal where the Law Society and law centres reached a compromise whereby the latter could provide advice as long as they did not do private work.

“This is even more of an anti-competitive measure now than it was at the time given non-commercial bodies and traditional firms are competing for the same work, in particular legal aid contracts.”

However, it said the separate business rule should apply to ensure law centres and similar bodies do not establish unregulated entities to carry out unreserved work.

The panel was responding to an LSB consultation on the transitional protection given to so-called special bodies like NFP organisations and community interest companies, allowing them to provide reserved legal activities without an ABS licence.

The LSB recommended ending this exemption from around April 2014, which the panel supported, saying that the existing protection that comes from the regulation of in-house solicitors is insufficient. “While the Charity Commission and funders play a valuable role, we agree with the LSB’s analysis that, taken together, the current framework does not provide sufficient assurance that all the risks [of advice from NFP bodies] can be mitigated.”

The LSB estimates that around 330 organisations will need ABS licences under the current list of reserved activities, but all other NFPs will do too if it extends regulation to all general legal advice, as outlined in a separate consultation published in April.

The Law Centres Federation has recently suggested adding £25 to every solicitor’s practising certificate fee to support the legal NFP sector.

 

By Legal Futures

Tags: ABS, Alternative business structures, law centres, Legal Services Board, Legal Services Consumer Panel, not-for-profit, reserved legal activities, separate business rule