Consumer panel urges regulators to act on lawtech

Chambers: We want to see lawtech thrive

Regulators need to monitor the development of legal technology and issue guidance to help maximise the opportunities it presents while delivering the necessary protection for consumers, the Legal Services Consumer Panel has said.

It also suggested that regulators explore “incentivising providers to use lawtech, to widen access to legal services”.

However, it comes against a background of research being published soon by the panel showing that 47% of consumers lack trust in artificial intelligence (AI) technology used to deliver legal services.

In a discussion paper advising all legal services regulators to be “proactive and creative” in promoting the development of lawtech, the panel said that, with the technology still in its early stages, this was “an opportune time for policy makers and regulators to shape and encourage an ethical approach to it”.

The paper prioritised individual consumers and the services delivered to them, and focused on the regulatory frameworks of solicitors and licensed conveyancers because, by volume of use, these are the largest providers in England and Wales.

“Some AI technologies can learn and develop independent of human influence. This can end up generating layers of complexity, which can be difficult even for their developers to comprehend,” the panel said.

“Some AI technology will need ongoing supervision and review, and regulation could be vital in this respect.

“Also, the opaqueness of the technology might lead to unintentional consumer harm or limit accessibility. Thus, regulators may want to explore issues around how best to ensure that transparency of data used to inform the algorithm is a key element in the development of AI solutions.”

It said regulators may want to consider how they can assist providers who use lawtech, to ensure the data used to inform algorithms was both “traceable and auditable”.

“There is also scope for exploring whether providers need tools to communicate the basis of decision-making, and how technology meets data protection requirements.

“Moreover, it is crucial that the providers of lawtech solutions can explain to consumers in a meaningful way and in plain language how the algorithm(s) used arrive at particular conclusions, the reasoning behind automated decisions, and the risks and responsibilities of different parties involved.”

The panel said such transparency would be useful to consumers before purchasing the service, and would aid investigation by the regulators or Legal Ombudsman when something went wrong.

“To achieve these aims, regulators may wish to consider a minimum set of regulatory guidance for providers using lawtech and software developers.”

The panel commended the approach of the Financial Conduct Authority (FCA), which has issued “detailed and technology-specific guidance to clarify its expectations from providers”.

The paper added: “It is important to note that the Law Society believes that the FCA’s approval of certain technologies has provided a level of trust in fintech that is missing in the lawtech space.

“We would encourage the regulators to consider collaborating on developing guidance similar to the FCA’s as a way of clearly setting out their expectations to providers, including expectations about the measures needed to protect consumers using lawtech-based services.”

It revealed too that the Solicitors Regulation Authority was working with insurers to provide guidance on the extent to which AI-driven services were covered by professional indemnity insurance.

The regulator is also planning research to understand how consumers think lawtech solutions are regulated and what protections they have when using them.

Panel chair Sarah Chambers said: “We want to see lawtech thrive for the benefit of consumers. This means that regulators, in partnership with lawtech developers and service providers, must work towards maximising the potential of technology.

“At the same time regulators must anticipate and mitigate the inevitable risks and shortcomings, by ensuring that their respective regulatory frameworks are fit for purpose and future proof.”

Earlier this year, Ministry of Justice spokesman Lord Keen said the case to review the legal regulation regime was made more urgent by the developments in technology.

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