13 August 2012

SRA finds support for outcomes-focused approach to referral fee ban

There is broad support for an outcomes-focused approach to implementing the ban on referral fees in personal injury cases, according to early indications from the Solicitors Regulation Authority’s (SRA) consultation on the issue.

However, despite the huge interest in the issue, there were fewer than 30 responses to the SRA’s discussion paper, published in June with a seven-week consultation period. They are now being collated ahead of a formal 12-week consultation in the autumn.

“Early indications are that the direction of travel outlined in the paper is broadly welcome,” according to an SRA spokesman.

The discussion paper said the SRA did not believe that implementing the ban through detailed rules would be consistent with outcomes-focused regulation. Instead, it favoured a set of mandatory outcomes and non-mandatory indicative behaviours which reflect the provisions and purpose of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which introduces the ban.

This will mean an outcome prescribing that firms cannot have referral arrangements that do not comply with the law, backed up by some illustrative indicative behaviours. According to the discussion paper, the indicative behaviours could be that:

• You have effective systems in place to assess whether any referral fee arrangement under consideration is assessed against the statutory and regulatory requirements applying in personal injury matters;
• Effective systems are in place to ensure that any payments you make for services, such as marketing do not amount to the payment of unlawful referral fees;
• Records and management information are retained to enable you to demonstrate that any payments made are lawful.

The Act says that if the regulated person paying or receiving the fee can provide it was for the provision of a particular service or for some other reason, and not the referral of a claim, then it will not be caught. The SRA has identified deciding whether a payment is for the referral – particularly when made for advertising – as a particular problem it will have to wrestle with once the ban is introduced next April.

This problem could scupper the government’s aim of reducing activities that encourage people to make unnecessary or spurious claims when they might not otherwise have done so, it has warned.

 

By Legal Futures

Tags: Legal Aid Sentencing and Punishment of Offenders Act, OFR, outcomes-focused regulation, referral fees, Solicitors Regulation Authority