NFP providers: looking for other sources of funding
Law centres and other not-for-profit (NFP) organisations should be allowed to charge for advice to help counter the impact of legal aid cuts and reduced local authority funding, the Legal Services Board (LSB) said today.
Further, their exemption from the alternative business structure (ABS) requirements should come to an end around April 2014, a year later than originally planned.
The Legal Services Act gives transitional protection to so-called special bodies like NFP organisations and community interest companies, allowing them to provide reserved legal activities without a licence.
The LSB is charged with deciding when and how regulation should be applied to them and has today issued a consultation on the way forward. It said that while there is quasi-regulation of some non-commercial advice providers, there is insufficient consumer protection for the risks posed.
“Non-commercial bodies are not ‘risk free’ simply because of the not-for-profit nature of their service. But nor does the possibility that they may decide to offer more commercial services in future necessarily mean that, by doing so, they automatically become higher risk. Rather, it is the nature of the body itself, the services it offers and its client base that determines the risks that regulation should target.”
However, there is now insufficient time to create a regulatory framework and issue ABS licences by April 2013, especially as new licensing authorities may emerge to seek authorisation to regulate some special bodies.
The LSB said that current regulatory restrictions on the NFP sector charging for advice and on business structures should be removed at once, and only imposed if necessary on a case-by-case basis. “The initiatives that special bodies/non-commercial organisations are considering have the potential to improve access to justice and are beneficial to the interests of consumers,” it said.
“We do not consider that there is a valid policy rationale for imposing such blanket restrictions, even if they can be waived in specific circumstances, particularly at a time when many of these bodies are having their budgets cut and may wish to be able to offer a wider range of services or charge consumers who can afford to pay something towards the cost of their legal advice.”
The LSB estimates that around 330 organisations will need ABS licences under the current list of reserved activities, but all other NFPs will do too if it extends regulation to all general legal advice, as outlined in a separate consultation published today.
