SRA decides not to follow CMC regulator in banning inducements

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26 June 2013

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The Solicitors Regulation Authority (SRA) will not be banning personal injury firms from offering inducements to clients to instruct them, but has warned that they need to consider whether doing so fuels a compensation culture.

The issue of inducements is a controversial one among personal injury firms, with some practices advertising that they offer clients an advance on their damages – up to £1,500 – or gifts such as an iPad.

Following Lord Young’s review of health and safety for the government, the Claims Management Regulator has, from April, banned claims management companies from offering such inducements.

But, issuing a guidance note to the profession today, the SRA said: “There’s no evidence to suggest that similar activity by those regulated by the SRA has any adverse effect on clients, so the SRA will not be following suit.

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“To ensure this remains the case, the guidance note has been issued to remind those in the legal profession of the relevant contents of the Code of Conduct dealing with inducements, such as chapter 8 (publicity).”

Taking an outcomes-focused approach to the question, the note says that when deciding whether it is appropriate to offer an inducement, firms “may wish to consider” factors such as whether it fuels a compensation culture, whether it influences the decision to instruct “as opposed to making a decision which is based on expertise and the quality of services offered”, whether the offer is aimed at vulnerable consumers, and whether it results in firms taking on “improper or spurious claims”.

The note also highlights the importance of firms taking “sufficient steps to ensure that potential clients or clients are fully informed as to the nature of the inducement and the terms on which it is being offered”.

SRA director of policy Agnieszka Scott said: “We understand that the Ministry of Justice has reacted to the findings of Lord Young’s report, particularly when it comes to offering inducements in advertising. We have often been asked to look at similar measures for solicitors, but we have not found anything to suggest that it is a significant problem or that clients’ interests are put at risk.

“We have no evidence which suggests that inducements encourage spurious claims to be made. We want this situation to continue.

“The guidance note has been produced to remind solicitors of their obligations as they look to promote themselves and attract new business – remembering that their publicity should not be inaccurate or misleading and that clients do not suffer. We will be monitoring this position, and if we become aware of any further evidence of increased risk to consumers, we will review the situation.”

See the full guidance note here.

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3 Responses to “SRA decides not to follow CMC regulator in banning inducements”

  1. What a tawdry cheap sidestepping of a significant problem! Of course these inducements are aimed at the vulnerable and of course they influence decision making. What a load of tosh !!!
    The SRA must be aware that the client rarely acually receives these iPads or upfront sums . The firms involved will point to the Ts & Cs……..but what client can understand them? All they see is a shiny new Apple or the illusion of a £1500 cheque falling onto their doorstep.
    I wonder when The SRA will take action against the first firm for offending OFR. I shall not hold my breath………

  2. Andrew Twambley on June 26th, 2013 at 1:40 pm
  3. So what’s bad for the goose is great for the gander? How can the SRA take this view for solicitors in direct conflict to the CMR and expect their argument to be taken seriously? Surely as the words left Ms Scott’s mouth she must have realised how ludicrous they would sound to her esteemed audience.

  4. Malcolm Roberts on June 27th, 2013 at 3:28 pm
  5. Completely agree Andrew. Is there really any hope for our industry when our main regulators cannot even agree on what the effect of these type of inducements have in this line of work. This is just playing straight into the hands of the insurance industry for their next trip to Number 10 when insurance premiums come under the spotlight. Well done guys.

  6. Frank Wade on June 27th, 2013 at 7:55 pm

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