SRA and claims regulator dismiss Law Society speculation of referral fee ban “difficulty”

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9 January 2013


Rousell: no problem with implementation

The Solicitors Regulation Authority (SRA) and the Claims Management Regulator (CMR) have dismissed a Law Society suggestion that they will not be ready to implement the referral fee ban on 1 April.

In its response to the Ministry of Justice consultation on the proposed reduction in fixed recoverable costs, the Law Society said: “We understand there is a possibility that the Solicitors Regulation Authority and the Claims Management Regulator may have some difficulty in implementing the referral fee ban on 1 April 2013 as originally proposed.”

However, the CMR, Kevin Rousell, flatly told Legal Futures that this was not right, while SRA executive director Richard Collins said the authority has “no problem” with the timetable either.

“The consultation is closed and we are currently analysing responses,” he said. “We will be putting recommendations to the standards committee next week, and after that to the [SRA] board later on in January. The requisite Handbook changes will be made by 1 April.”

The society also released some results of a survey conducted last month of members who undertake personal injury work, although it refused to tell Legal Futures how many solicitors took part in the poll. This showed that 68% of them pay referral fees, and 83% “other marketing costs”. Nearly two-thirds (64%) paid £800 or less referral fee per case, while 46% paid £500 or less.

Three-quarters of respondents said that other forms of marketing would cost them more after the referral fee ban, while only 7% said their marketing costs would stay the same.

As reported on our sister site Litigation Futures on Monday, the Association of Personal Injury Lawyers told the government that its research indicated that those firms which do not pay referral fees spend around £500 on marketing costs per case. It said: “The figures indicate that the cost of acquiring cases is not substantially different from the [government’s] speculated level of referral fees.”

The £700 reduction proposed by the Ministry of Justice to the current £1,200 fixed recoverable costs in low-value road traffic cases appears to reflect what officials believe to be the average referral fee – although it has not made the methodology clear – despite repeated arguments from the Law Society and claimant groups that the negotiations in 2009 that set the current figure did not take referral fees into account.

The Law Society response said there is “substantial evidence” that the fee should in fact be increased to £1,300.

Meanwhile, the Ministry of Justice said last week that its claims management regulation unit has seen 352 companies shut down, suspended or warned for bad practice between April and November 2012 – 209 were shut down, three suspended and 140 warned.

Mr Rousell said: “In the past five years we have shut down more than 900 CMCs and are continuing to work with the Information Commissioner’s Office to ensure firms which break the law on unsolicited calls and texts are dealt with.”

Justice minister Helen Grant said the number “shows we mean business”.

 

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