Legal Services Consumer Panel: still no evidence to justify referral fee ban

Davies: panel stands by recommendations without a shadow of a doubt

The Legal Services Consumer Panel is standing by its recommendation to retain referral fees, saying it has seen no new evidence of consumer detriment to back a ban.

Meanwhile, the Bar Council says its legal advice shows referral fees fall foul of the Bribery Act, and Legal Futures sources indicate that the government is leaning towards the ban being in the form of a regulatory, rather than criminal, offence.

In her first interview since taking over as panel chairwoman, Elisabeth Davies said it had discussed the issue last month and stood by its May 2010 recommendations in favour of greater transparency instead of a ban “without a shadow of a doubt”.

The Legal Services Board came to a similar conclusion a year later, while leaving open the possibility of individual regulators introducing bans.

Later today justice minister Jonathan Djanogly will appear before the transport select committee as part of its investigation into the cost of motor insurance, and is expected to be questioned about the government’s recent announcement of plans to ban referral fees in personal injury cases.

Former justice secretary Jack Straw, who has led the anti-referral fee charge, will also give evidence to the committee, as will the Motor Accident Solicitors Society, Access to Justice Action Group and insurance giant AXA.

Ms Davies, who is director of partner relations at Age UK, revealed that when it began its investigation into referral fees, the panel was instinctively in favour of a ban, “but the evidence absolutely didn’t back that up… I’ve not seen any evidence that would indicate that there is a reason to believe there is consumer detriment caused by referral fees”.

She pointed out that consumers who took part in the research were also initially uncomfortable with referral fees, but decided they were acceptable as long as there was transparency.

Bar Council chairman Peter Lodder QC told barristers this week that advice from Treasury Counsel said that referral payments, made or sought solely to decide who is instructed in a case, are an offence under the Bribery Act 2010. Law Society guidance earlier this year said referral fees do not fall foul of the Act.

Mr Lodder said: “There are many tales of sets being offered work for a ‘kick-back’: quite properly, most refuse. But it is now clear that both offering and accepting work under these circumstances is a criminal offence.”

He continued: “I have raised this issue with the Lord Chancellor, and the government has made public its commitment to ban referral fees in insurance claims. We have drawn their particular attention to the practice in publicly funded cases. The government recognises the need to stamp out this abuse and we are pressing them to extend their investigation and take immediate steps to implement a ban.”

Finally, soundings taken by Legal Futures indicate that the government’s most likely approach to implementing the ban will be an enabling provision in the Legal Aid, Sentencing and Punishment of Offenders Bill, which will then place the burden on the legal regulators to enforce the ban. This is despite justice secretary Ken Clarke previously indicating that a criminal offence was likely.

Mr Djanogly is likely to face questioning on this point today.


    Readers Comments

  • But is there any evidence that it works to the consumer’s advantage? For that is the World we live in…

  • The Legal Services Consumer Panel should be praised for taking such a sensible approach on the issue of referral fees.

    We entirely agree that, instead of a knee-jerk ban, what is needed is for injured people to have complete transparency and proper regulation. Claimants should be able to see exactly what is happening with their case and be aware of the choices available to them from the outset.

    APIL’s concern has always been the protection of the injured person. This cannot be achieved by driving referral fees back underground where we know from previous experience that arrangements would be subject to no transparency or control at all.

    Instead, a tight rein should be imposed on claims management companies, insurers and other introducers. We would like to see the need for written authority to be given every time an individual’s details are passed on. And the pernicious effect of spam texting must also be stopped.

    Deborah Evans
    Chief executive
    Association of Personal Injury Lawyers (APIL)

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