The unregulated sector may account for up to 9% of the total market for individuals’ legal needs and up to 39% for small businesses, Legal Services Board (LSB) research has indicated.
The oversight regulator has decided that a full review of the current list of reserved legal activities is not required for now – but particular areas of practice where there is consumer detriment may need to be looked at more urgently.
The question of whether the list of reserved activities should be changed, along with concerns about consumer confusion and a lack of redress for clients of unregulated providers, have been around for many years.
The LSB has been working to build a better understanding of the unregulated sector as part of its ‘scope of regulation’ project, which forms part of its 10-year vision for reshaping legal services, published last March.
A statutory review of the list of reserved legal activities has been in the air for some time but the LSB’s 2022/23 business plan said it had more urgent priorities for this year.
According to papers before last week’s meeting of the full LSB board, a soon-to-be-published study found that the unregulated sector was large and diverse, covering family to intellectual property to employment issues that consumers face every day.
In some areas, such as will-writing, the market share of unregulated providers was likely to be “much higher” than the overall estimates.
The findings indicated that “there is detriment in some areas; for example, we identified case studies indicating some poor advice and upsold or mis-sold services related to will-writing and trusts”.
At the same time, unregulated providers offered “some benefits”, including potentially cheaper and more innovative legal services – LSB research in 2018 showed that unregulated providers were 1.5 times more likely to have undertaken innovative activities than other providers and twice as likely to have successfully introduced new or improved services.
The board also heard that data from Trustpilot indicated that levels of satisfaction were high and similar for both regulated and unregulated providers. This contrasted with the LSB’s own data, which showed that those using unregulated providers were more likely to report dissatisfaction.
In complaints about unregulated providers to Citizens Advice, consumers cited higher-than-expected costs, unreasonable delays and poor advice.
“We consider that the evidence we have obtained does not provide us with a compelling case to justify pursuing a resource-intensive full statutory review of the reserved legal activities at this time,” the paper, which was approved at the meeting, concluded.
However, the LSB will consider whether to conduct a “targeted review” in specific areas where there is a risk of consumer detriment.
“We also propose to further explore the government appetite for a full statutory review, including understanding the potential funding for and timing of a review of this nature.”
Alongside the research, the LSB said it would consider whether to activate a power in the Legal Services Act 2007 to enter into voluntary regulatory arrangements, such as accrediting self-regulatory arrangements run by others, or publish a register of such accredited providers.
This could also take the form of giving clients of unregulated providers access to alternative dispute resolution.
Will-writing has often been talked about in this context, in particular members of will-writing bodies giving clients access to the Legal Ombudsman.
In December 2020, the Competition & Markets Authority said the case for wholesale reform of legal services regulation was even stronger than when it looked at the issue four years previously, because of the growth of the unregulated sector, fuelled by technology.
It called for the creation of a mandatory public register of unregulated providers, which was inspired by the recommendation of Professor Stephen Mayson earlier that year. The Ministry of Justice has expressed interest in this idea.