Clarke: paying referral fees likely to be criminal offence

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By Legal Futures

14 September 2011


Parliament: pressure on personal injury lawyers and claims managers stepped up

The ban on referral fees is likely to take the form of a criminal offence, Lord Chancellor Ken Clarke revealed yesterday.

Meanwhile, his Labour predecessor and anti-referral fee campaigner Jack Straw has called for the fees payable to lawyers under the road traffic accident portal to be halved to £600 – but has been accused by the Association of Personal Injury Lawyers (APIL) of being “deluded”.

Speaking during justice questions in the House of Commons, Ken Clarke said the government is still considering how to put the ban into practice, “but it is likely to be in the form recommended” by Mr Straw – who argued in his question that “given the level of malpractice we see across the legal and paralegal industry, the ban will have to be backed by the criminal law”.

A regulatory offence is another option actively under consideration, Legal Futures was told last week.

Mr Clarke also praised Mr Straw for prompting a decision on the issue. “He got in first, really, because I waited for the opinion of the Legal Services Board, which I have not followed but which I had to consider.”

Responding to a follow-up question from Conservative barrister Robert Buckland, Mr Clarke said: “As the professional bodies strongly support us, we look forward to their co-operation because they are in the best position of all to ensure that different types of abuse with the same bad consequences are not used to evade the ban.”

Shortly afterwards Mr Straw introduced a ten-minute rule bill – a procedure which allows MPs to raise issues of concern – aimed at motor insurance regulation.

As well as banning referral fees, he called for damages for whiplash only to be paid where there is “clear objective evidence that real injury has been suffered” – citing the rise in whiplash claims – and an end to “postcode discrimination” by insurers assessing motor premiums in areas where there is a higher risk of personal injury claims.

On fees, he said: “In my Blackburn constituency, and in many other constituencies, there are law firms with banners outside their offices promising £650 in cash in return for any new personal injury claim. They can make those promises and pay out because the flat fee that insurers pay the lawyers for claims below £10,000 has been set too high.

“Such claims are now processed through an electronic portal, which costs the law firm no more than £100 in staff time to operate. The flat fee is £1,200, so even if a firm pays a £650 introduction fee it can make exorbitant profits. Clause 3 would cut the fee in half.”

APIL chief executive Deborah Evans responded: “Jack Straw is deluded if he thinks a lawyer could possibly give advice to an injured person for the price of £100. In all cases the solicitor needs to talk to the client to understand the symptoms, and the impact of the injury on the client’s life, as well as obtaining a medical report. These were the factors taken into account when fixed costs for road traffic accidents were agreed with the insurance industry only last year.”

She also quoted an Association of British Insurers report from 2008 which explained that changes in car manufacturing have helped reduce the incidence of serious injuries, but may increase the incidence of whiplash.

See blog: The Dangerous Fees Act 2011

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