[1]CML: lenders may turn to “alternative providers”
Small firms and sole practitioners could be removed from conveyancing panels if the Solicitors Regulation Authority goes ahead with its indemnity insurance reforms, the Council of Mortgage Lenders (CML) has warned.
The CML also said that it did “not believe there is sufficient evidence at this stage that the professional indemnity insurance proposals will result in premium levels being reduced”.
Under the plans, launched by the SRA last month, businesses with annual turnovers of over £2m [2], including mortgage lenders, would no longer be able to claim on solicitors’ compulsory indemnity insurance.
Des Hudson, chief executive of the Law Society, predicted that if the proposals went ahead, they would “destroy high street conveyancing” [3]as lenders responded by “introducing super-panels overnight”.
In a statement yesterday, the CML said it was concerned about the “potential unintended consequences” that could arise from the indemnity changes.
“It is possible it could result in lenders moving to smaller panels of law firms who are able to obtain PII cover which suits the lenders’ needs, and this may affect the business of sole practitioners and small firms.
“It may also create higher levels of separate representation, which could have the consequence of causing time-consuming replicated work and additional costs to both borrower and lender.
“Lenders may also consider using alternative providers of conveyancing services where they perceive there to be greater protection for them as clients.”
Linda Lee, former president of the Law Society and chair of its regulatory affairs board, has attacked the indemnity insurance reforms in a letter to local law societies.
She said small firms would find themselves less well protected and might still have to buy indemnity insurance at a higher level.
“Many such firms may find themselves out of the conveyancing market altogether because lenders will regard the new protection as inadequate.”
Ms Lee criticised other aspects of the SRA’s reform programme, including abolishing the requirement on firms to submit annual accountants’ reports, and the lack of time to respond to the consultations, which close on 18 June.