The legal market has proven “inept” at responding to the needs of vulnerable consumers and its regulators are not coming up with a strategy to tackle the problem, the Legal Services Consumer Panel has said.
The watchdog said it was also concerned that regulators were not thinking about consumer confusion sufficiently as they looked to make the market more flexible.
Issuing its three-year strategy, the panel said its primary strategic aim was to improve transparency in the market through “information remedies”.
It explained: “Our focus on information remedies will also emphasise the need for all consumers to understand the difference between regulated and unregulated providers and any reduction in protection that may flow from their choice of service providers.
“Our first aim will be supported by a further aim to protect consumers (including micro and small businesses) and keep pace with changing risks.”
This second aim comes against a background of research showing that consumers feel vulnerable when using legal services and value the protection that regulation offers them.
The panel said: “However, [Legal Services Board] research into vulnerable consumers’ experience of legal services found a market inept, in our view, at responding to the needs of vulnerable consumers.
“This research finding is corroborated by the panel’s joint research with the approved regulators on client-care letters.
“This also found that the needs of vulnerable consumers are not being met. At present, there appears to be no clear regulatory strategy around how to deliver good outcomes for vulnerable consumers.”
The panel’s research has also shown that consumers lack the confidence to complain about poor service and “many discover significant gaps in redress when they try”, it said.
Confidence in complaining about a lawyer (44%) is lower than confidence in complaining about supermarkets (70%), banks (55%) and mobile phone companies (51%). Nearly half of dissatisfied consumers – so-called ‘silent sufferers’ – did not complain.
“This cannot be acceptable in a market where consumer engagement is important for competition. The sector must work harder to find the underlying causes and address them.”
The panel said that the way new competition and technology were changing the market was “mainly for the better”, but said these market forces were also presenting new types of risks which regulators had to keep pace with.
It said: “There is also pressure on regulators to reduce regulatory burdens and modernise. As a consequence we have seen a drive towards more flexible services, including proposals to remove rules which may preclude service providers from innovating.
“Change is necessary, but in doing so, regulators must take care to strike the right balance between access to justice and consumer protection.
“Regulators drive towards flexible services should be mindful of the need to balance this against an increase in consumer confusion. The panel has found itself increasingly advising on the need to minimise consumer confusion.”
It said it was concerned that regulators across the sector are not paying enough attention to fragmentation, for example the prospect of differences in professional indemnity insurance and compensation funds.
“We will continue to highlight these issues and where necessary call for a sector-wide approach and standardisation in consumers interest.”