Lawyers grumble about PC fees without knowing what they’re paying for, survey reveals

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18 March 2015

Sir Michael Pitt

Pitt: determined to minimise regulatory burdens

Many lawyers, particularly solicitors and barristers, complain about their practising certificate (PC) fees, but there are high levels of ignorance about what they are paying for, a major cost of regulation survey has found.

The survey of almost 1,000 lawyers and firms by the Legal Services Board (LSB), the first of its kind to include the views of all kinds of legal professional, revealed that the least popular area of regulation was money laundering.

At least two-thirds of lawyers were aware that their PC fee funded their own regulator.

However, 48% of solicitors, 58% of chartered legal executives and 59% of licensed conveyancers did not know it funded the LSB. Barristers did slightly better, with 39% unaware that a share of their PC fee went to the LSB.

Six out of ten barristers and solicitors knew they were paying for the Legal Ombudsman, but only 53% of chartered legal executives and 52% of licensed conveyancers.

The survey was the first stage of the LSB’s cost of regulation research. The next phase, which focuses in more depth on assigning actual costs to specific areas of regulation, is currently underway. The LSB said this next phase of the project will attempt to understand which costs of regulation arise only as a consequence of legal sector regulation and which of those costs firms would have incurred anyway as part of good business practice.

The survey showed that a quarter of chartered legal executives and a third of notaries did not appear to know they were paying through their PC fee for their respective regulators.

When it came to complaining about PC fees, 45% of law firms regulated by the Solicitors Regulation Authority (SRA) viewed them as “poor value for money” compared to only 19% of firms overseen by the Council for Licensed Conveyancers.

Barristers were equally unhappy about PC fees, with 46% of individual barristers regarding them as poor value and only 11% as ‘reasonable’. This contrasts with the 60% of costs lawyers who thought their fees were reasonable.

Chartered legal executives had a more balanced approach – 32% thought they were reasonable compared to the 27% who regarded them as poor value.

Views on fees varied by size of firm, regardless of the regulator. Over half of sole practitioners (52%) saw them as poor value, reducing to a third for firms with between 11 and 49 employees and 31% for those with over 50.

Firms of all kinds identified the highest cost areas as indemnity insurance, annual PC renewal and changes to regulation. File retention came fourth on the list, with more licensed conveyancing firms than solicitors rating this as high cost.

When it came to ‘top 20’ areas of regulation lawyers wanted to remove, money laundering came in joint first place with continuing professional development (CPD). These were followed by complaints-handling procedures, information requests and only then PC costs.

Indemnity insurance topped the list of top 20 areas of regulation to keep, followed by CPD, codes of conduct or professional standards, and then, strangely enough, PC renewal.

Money laundering was the only area of regulation which had more respondents wanted to get rid of it than keep it.

Views on compliance costs as a whole varied by practice area, with the belief that PC fees were poor value for money most widespread among those carrying out criminal work (52%), followed by wills and probate (51%) and family (48%).

More than 300 (327) law firms regulated by the SRA responded to the survey, along with just over individual 200 barristers.

Sir Michael Pitt, chairman of the LSB, said he was determined that the LSB minimised regulatory burdens on the legal profession.

“This is important because ultimately those costs are passed on to business and consumers,” he said.

“We also know from other research that cost is one of the reasons why consumers don’t seek legal advice, so there are clear consumer and public benefits to a lower cost regulatory regime.”

Sir Michael said once the LSB’s work was complete, it would “help all practitioners to better understand how costs arise and help all of us prioritise how we ensure costs are kept to a minimum.”

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