Law Society lays into consumer panel over single compensation fund

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28 June 2013


Hudson: LSB should ignore panel’s report

The Law Society has dismissed the Legal Services Consumer Panel’s call to consider a single compensation fund for all legal service providers.

Criticising the “superficial analysis”, it claimed that the panel’s report, published earlier this month, “lacks the degree of rigour necessary for it to be considered seriously”.

The Legal Services Board (LSB) asked the panel to investigate whether regulators’ consumer protection arrangements are adequate and to identify what the minimum level of protection should be for consumers, and the Law Society said the panel had not fully addressed its brief.

Chief executive Des Hudson said: “While we support many of the features that the panel sees as good practice in a consumer protection system, its main recommendation that there should be a ‘single financial protection regime’ for all legal services providers that provides comprehensive protection lacks the degree of rigour necessary for it to be considered seriously.

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“The panel fails to explain how a single scheme is achievable or how it would be administrated across multiple regulatory regimes. It also fails to provide sufficient evidence to substantiate its claim that it will be in consumers’ interests.

“It is quite surprising that the panel has not sought to explore these issues fully before proposing the idea.”

Mr Hudson said the panel had also failed to address where the balance should lie between the level of client protection, “which is disappointing given that the cost of such protection will ultimately be borne by clients”.

Other key issues ignored, he added, were what constitutes comprehensive cover and whether there are circumstances where this comprehensive cover may not be appropriate or worth the cost to consumers.

He has called on the LSB to ignore the report. In a letter to LSB chief executive Chris Kenny, Mr Hudson said: “The panel has not given any thought to how risk-based contributions towards a single compensation fund will be measured. We are not convinced that there would be a cost benefit to moving to risk-based contributions since a degree of cross-subsidy is required for compensation arrangements to be viable.

“The panel also failed to consider the potential for its proposals to impact on the diversity and competitiveness of the legal profession.

“The consumer panel’s suggestion that the SRA should take a deposit from all law firms when they open to be used against cost of any potential future intervention is unworkable and would create an additional barrier to entry and regulatory burden. We also doubt that, in practice, a deposit will provide any sensible protection for consumers or the profession.”

He said the Law Society was “most disappointed by the lack of new evidence and the panel’s superficial analysis of the currently available information… We do not believe that the panel’s report contributes materially to the debate”.

Writing on Legal Futures last week, Anna Bradley, the chairman of the Council for Licensed Conveyancers, the panel’s recommendation.

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One Response to “Law Society lays into consumer panel over single compensation fund”

  1. I’m sure that the LSB is quaking in its shoes at this onslaught.

    Like a politician once said, “being savaged by the (Law Society) is like being savaged by a dead sheep”!

    My serious point is, when did the LSB listen to the Society?

  2. Andrew Woolley on June 28th, 2013 at 3:04 pm

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