Separate business rule reform could leave consumers “in the dark”


Foster:

Foster: clear consent does not mean informed consent

Solicitors who refer consumers to their unregulated businesses under the revised separate business rule (SBR) may obtain consent to do so, but there is a serious risk that it will not be informed, a member of the Legal Services Consumer Panel has warned.

Andy Foster, director of regulatory services at Capita and a former senior trading standards officer, said that unless the profession got to grips with the issue of informed consent, the reforms could come back to bite lawyers.

The Legal Services Board this summer approved sweeping reform of the SBR, which would allow solicitors to set up separate businesses providing unregulated services – so long as consumers are properly informed about the consequences of using the separate business, such as not having the regulatory protections they enjoy when using the law firm.

The LSB admitted that the changes “carry some risks to consumers”.

“The dictionary definition tells us that ‘informed’ means a decision or judgement based on an understanding of the facts,” Mr Foster said in a blog for the panel’s website. “This suggests that consumers need to demonstrate behaviour well beyond simple agreement.

“Throughout my career as a trading standards practitioner I have spent a lifetime picking up the pieces for consumers when things have gone wrong.

“In the majority of these cases there was clear consent to enter into contracts for goods and services but very rarely did I see evidence that the consumer acted in an informed way.”

Mr Foster said it has become clear in modern legal frameworks that a “simple, well-intentioned relaxation of the rules designed to stimulate and open up access to justice can often result in leaving the vulnerable behind”.

He explained: “For years policy makers have developed regimes on the principle that when consumers are exposed to information it naturally follows that they will understand said information and make a judgement that serves their best interests.

“This simple notion that understanding follows information is of course deeply flawed, even when a consumer has signed a declaration or waiver.”

Mr Foster said consumers made decisions “for a whole variety of reasons” and only on some occasions did they correlate with the consumer’s best interests.

“Everyday consumers agree to enter into contracts because of feelings of urgency, price, times of emotional distress, because they have invested time with one provider already, because they are overwhelmed with a complex situation, because of the opportunity cost of shopping around, because of personal recommendation or simply because of convenience.

“Very rarely will issues of redress options, or whether a provider is regulated or not, enter into that decision making process. And although firms will have the job of ensuring their clients do just that before referring them on to a separate business, this is not as easy as some might think.”

Mr Foster described informed consent as “very difficult to detect, time-consuming to achieve and something which risks coming back to bite the profession if it isn’t thought through carefully”.




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