CMA launches investigation into unregulated legal services

CMA: Consumer protection concerns

The Competition & Markets Authority (CMA) has returned to the legal market and launched an investigation into unregulated will-writing, online divorce and pre-paid probate services.

The watchdog – whose 2016 review of the regulated legal services market has led to significant regulatory change – has issued a call for evidence over concerns that not all of these businesses are complying with consumer protection law.

It said: “When it comes to legal services, customers now have many alternatives to the conventional law firms on the high street, especially for services where the adviser does not need to be a solicitor.

“Alternative providers very often offer services that are innovative and convenient for consumers, and that can be cheaper too. But where they are unregulated, it becomes all the more important that normal consumer protection laws are complied with and, if necessary, enforced.”

The CMA said its initial research has identified concerns that consumers were being misled by advertising from unregulated will-writers which offered an extremely low initial fee for advice but did not indicate that final costs could increase significantly.

Other issues included the use of potentially unfair contract terms – such as exclusions of liability, failures to provide cancellation rights, and terms which automatically appointed the firm as executor, often for a fee – and reports of pressure selling and coercion of vulnerable customers.

The CMA said so-called ‘quickie’ online divorce services have grown in popularity since the pandemic but there were concerns over “misleading claims about both the simplicity of the process and prices, which leave customers unclear about what they can be helped with or what they are paying for”.

Inadequate quality of service was another problem, such as firms using the wrong forms, entering incorrect details, sending papers to the court late, and not communicating efficiently with customers.

The CMA said it was worried too that, if a company ceased to operate, there was a risk that customers’ money or important documents, such as their will, may be lost.

Pre-paid probate plans were “a new development in the market” that have raised questions over pressure selling techniques being used on elderly and other vulnerable people, a lack of transparency about what costs are covered, “plans that are unnecessary or fail to serve their purpose, leading to delays in the probate process and bereaved relatives being left unable to settle bills or sell property”, and a lack of customer awareness that their money may not be adequately protected, even if held in trust.

Sarah Cardell, chief executive of the CMA, said: “These services are essential to people, often at the most challenging times in their lives. The CMA is aware that rising living costs mean people are watching their spending, so shopping around for a more affordable option is attractive and sometimes a necessity.

“These may not be frequent purchases, but they are life-changing. That’s why it’s so important that we investigate so that people can select the right legal service for them – for divorce or probate or will-writing – with confidence.

“It’s essential that firms get the basics right, including complying with general consumer law which applies to all traders. Customers must get a fair deal.”

The CMA will now write to firms that offer these services in order to seek further information about their practices and has also called for interested parties to send their responses by 4 September.

It stressed that the project was at an early stage and that the CMA has not yet formed a view on these issues.

Sarah Manuel, head of professional standards at STEP, which describes itself as the professional body for inheritance advisers, said the organisation supported the investigation “because it should help raise standards and give consumers greater protection” – although she added that STEP backed the regulation of will-writing.

She added: “We also support the CMA’s investigation into pre-probate payments. It should help protect consumers from bad advice, as prepaid probate is not something we would expect our members to be advising their clients to pay.”

It was just over a decade ago that the then Lord Chancellor, Chris Grayling, rejected the Legal Services Board’s (LSB) recommendation that will-writing become a reserved legal activity.

Recent research from the Solicitors Regulation Authority estimated that unregulated providers have 6-8% of the legal market, worth between £2.4bn and £2.9bn, and that most supported “some aspects of regulation” for their areas. However, there was not a clear case for major reform, it concluded.

The LSB’s ‘mapping the unregulated sector’ research last year estimated that it might account for up to 9% of the total market for individuals’ legal needs and up to 39% for small businesses. In some areas, such as will-writing, it was likely to be much higher.

The oversight regulator continues to consider whether and how to review the list of reserved legal activities.

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