The Solicitors Regulation Authority (SRA) has backed down over its controversial plan to cut the maximum award from its Compensation Fund from £2m to £500,000.
The decision was facing rejection by the Legal Services Board (LSB), which last month issued a warning notice that it is considering refusing permission for the change, along with one that would exclude claims from “large” charities and trusts with assets or annual income of over £2m.
The Compensation Fund pays grants to people who have suffered financial loss because of a solicitor’s dishonesty or failure to account for client money where not covered by indemnity insurance.
Despite strong opposition from both the Law Society and the Legal Services Consumer Panel, the SRA decided last year to reduce the maximum payment for a single grant to £500,000, saying only 0.2% of all payments over the previous 15 years have been for more than that amount.
But minutes of the 27 April SRA board meeting, only published yesterday, said that following discussions with the LSB and the submission of further information in relation to larger charities and trusts, “the board agreed that we should submit an amended application with the reduction in the single claim limit from £2m to £500,000 removed from the reform package”.
They went on: “This does not preclude returning to this proposal at some future date but does mean that the rest of the package can be implemented in a more timely fashion.”
An SRA spokesman declined to comment further on the reasoning; the revised application has not yet been submitted.
SRA data showed that, if that cap had been in place since 2010, a small number of consumers would have experienced “significant detriment”, the LSB notice said, while costs savings would have been an annual average of £2.50 per solicitor and £50 per firm.
“Although the LSB recognises the benefit of this proposal, it does not consider that this alone justifies the significant detriment that would be experienced by a small number of consumers.
“The LSB considers that the SRA should provide further explanation or quantify the wider potential benefits of the individual cap that could be realised to offset this significant detriment.”
The Law Society welcomed the move. Even though the number of applications likely to be affected was very low, “at a time when other professional compensation schemes, such as the Financial Ombudsman Service, are increasing their maximum payouts, this change would have sent entirely the wrong message to consumers,” a spokesman said.
“We are happy to see the SRA has made the right decision in this matter, and recognised the paramount importance of its role protecting the interest of the consumers of solicitors’ legal services.”
Meanwhile, Anna Bradley has been reappointed as chair of the SRA board for a second three-year term, running until the end of 2024.
Her reappointment was confirmed by an independent panel chaired by Elizabeth Filkin CBE.
Ms Bradley said: “The SRA has made good progress in delivering an ambitious reform programme, including implementing the new Standards and Regulations and rolling out the Solicitors Qualifying Examination, which marks a step-change in how people join the profession.
“Looking ahead, our new strategy embraces the potential that innovation and technology has to help people access the legal services they need.”