The Law Society’s conveyancing quality scheme (CQS) and lender-specific requirements amount to double regulation of lawyers and there needs to be a sector-wide effort to resolve the problem, the Council for Licensed Conveyancers (CLC) has urged.
In its response to the Ministry of Justice’s legal services review, the CLC said it was too early to rip up the Legal Services Act 2007, but identified two “quick wins”.
Lender panels were its main concern. CQS and lender criteria for panel firms “amount to double regulation in the sense that regulated lawyers are having to meet two or sometimes even three sets of separate requirements”, the CLC said.
“These additional quasi-regulatory burdens are being placed on practitioners who are judged by the frontline regulators, acting under the oversight of the Legal Services Board and Ministry of Justice, to be fit to practise.
“Lenders may be seeking to address real risks but we would contend that these are better addressed within the framework of regulation, with all the safeguards provided by the full regulatory framework around proportionality and consumer interest. Ad hoc actions by lenders are not subject to those controls.”
These ad hoc arrangements, which can differ from lender to lender, result in “unfair treatment of practices and individuals, place additional burdens on the sector and inhibit competition and innovation”, the CLC argued.
“We believe that a more general, sector-wide effort is needed to resolve this problem bringing together the frontline regulators and the Legal Services Board with the Financial Conduct Authority, Prudential Regulation Authority and lenders’ representative bodies.”
The other quick win was to rationalise professional indemnity requirements for innovative firms so that a practice changing regulator is not treated by the first regulator as having shut down, meaning it then has to take out expensive run-off cover.
“This disincentive to changing regulators is wrong and makes the objectives of the Legal Services Act all the harder to achieve, inhibiting the free operation of the market and the evolution of the legal services offering to consumers.”
More generally, the CLC said the impact of the Legal Services Act needs more time to play out.
“A single regulator was rejected then, just six years ago, for both philosophical and pragmatic reasons based on a thorough study of the models of regulation available. It is difficult to see what has changed in a few short years that would cause us now to consider a radically different direction than the course set by the LSA.”
While there may be a case for a single regulator in the future, the CLC argued that there is a “continuing and important role for a range of regulators developing diverse approaches to regulation… to help foster change and innovation in the sector”.
As well as the quick wins, the CLC identified medium-term goals that it said would improve the operation of the market:
- Making the terms of the CLC’s enabling legislation (the Administration of Justice Act 1985) less prescriptive so that the regulator can move more swiftly;
- Support for a legal education council – as recommended by the Legal Education and Training Review – that would “entrench collaboration on legal education”;
- Establish centralised compensation arrangements across the sector;
- Rationalise the regulatory objectives;
- A root-and-branch review of which legal services are regulated; and
- Complete the separation of regulatory and representative functions.
CLC chair Anna Bradley said: “The innovation and change that the Legal Services Act 2007 enables is only slowly being taken up by the market. Our submission sets out pragmatic steps that can be taken easily and quickly to improve the operation of the regulatory framework .
“The essential, but protracted, panoply of research, consultation and legislation that would be required to move to a fundamentally different framework for the regulation of legal services now would blight the market for years.”