A single regulator for all legal services providers and a single code of conduct is the way forward for the market, the Legal Services Consumer Panel argued today.
In the first published response to the Ministry of Justice’s call for evidence on the current regulatory regime, the panel essentially recommended tearing up the Legal Services Act 2007 and starting again.
It said the existing framework does not provide “a sustainable model in the long term to offer consumers the best system of consumer protection or support a competitive market place”.
The panel said the government should immediately task the Legal Services Board (LSB) with drawing up a new blueprint with a single regulator at its heart, the other elements of which should include access to the Legal Ombudsman for all legal services transactions and a focus on the legal activity rather than the person doing the work.
“A regulatory system based on professional title frustrates a more risk-based and targeted regulatory regime focused on legal activities and entities,” it said.
On a single regulator, the panel asked: “Is it really necessary to maintain separate systems that carry out essentially the same function? Based on data collected by the LSB, we estimate that the total cost of the approved regulators is nearly £96m.
“Economies of scale would be achievable by rationalising these separate arrangements and it should be possible to achieve this within a system of independent regulation that respects differences between types of practitioner and enables expert input by professional bodies.”
It said that experience in other sectors shows it is possible to amalgamate regulatory functions across similar professionals – the Financial Reporting Council operates a single set of disciplinary arrangements for accountants, actuaries and accountancy firms.
The panel argued that as divisions between branches of the profession fall away, “the need to retain different codes becomes harder to maintain and may even inhibit them from working together”.
It added: “However, we can see a scenario where there is a single core code to which all providers are subject, supplemented by additional rules, where necessary, for different market segments… Crucially, rationalising codes of conduct would not amount to fusion of the legal profession or end the independent bar. It would just mean working from the same basic set of rules, except where genuine differences justify separate approaches.”
The panel’s 58-page response detailed countless shortcomings of the current system, which it described as a “labyrinthine maze” where even the regulators can be unsure what regulation actually covers.
The list of reserved activities is “narrowly drawn and not based on a consumer protection rationale”, it continued. “The unregulated sector is growing in influence and new markets are emerging, yet consumers are unaware they are unprotected when using these providers.”
At the same time, the panel said the LSB should consider whether all types of consumer should be protected by regulation or whether some, such as large corporate clients, “can be excluded from scope”.
Other criticisms included duplication of responsibilities – with many lawyers subject to multiple regulatory regimes” – smaller regulators’ “lack of capacity and capability to deliver adequate consumer protection”, and a “lack of cultural independence” at those bodies, such as the Law Society and Bar Council, where the independent regulators remain under their umbrella.
Panel chair Elisabeth Davies said: “The current system isn’t delivering the outcomes consumers need, offering instead a confusing maze where consumers can find themselves at a dead end due to gaps in redress and regulation. The patchwork of regulators is an expensive duplication of effort that no-one can afford to persevere with.
“The Legal Services Act introduced welcome competition reforms but passported in the old regulatory structures – as the market and consumer behaviour has changed, these structures now look increasingly out-of-date. They need to be replaced by a new system, delivering the required consumer outcomes and reflecting how modern consumers use legal services.
“A single regulator, entirely independent of the profession, is most likely to give consumers confidence that regulation is protecting them, not lawyers. It could produce the simplest system to navigate for consumers, making it easier for them to know their rights and make informed choices.”