Referral fees: MoJ rules out extending ban beyond PI for now

The government has rejected a call by MPs to extend the proposed ban on referral fees beyond personal injury work – but a senior backbencher has predicted that it will have to return to the issue.

The Ministry of Justice has also put on ice their recommendation that it introduce custodial sentences for breaches of the Data Protection Act (DPA) which covers those who pass on leads to personal injury lawyers among others.

In October, the justice committee said: “Referral fees reward a range of illegal behaviour, and banning them, together with introducing custodial sentences for breaches of the Data Protection Act, would have the twin effect of both increasing the deterrent and reducing the financial incentives for these offences.”

But in its newly published response to the report, Referral fees and the theft of personal data, the Ministry of Justice said the referral fee ban – now contained in the Legal Aid, Sentencing and Punishment of Offenders Bill – had been prompted by concerns about “personal injury claimants being actively encouraged to pursue their claims”.

It added: “However, the provisions in the bill do include powers to enable the Lord Chancellor to make regulations to extend the ban to other types of claim and legal services, should the need arise in due course.”

Section 55 of the DPA makes it a criminal offence to knowingly or recklessly obtain, disclose or procure the disclosure to another person of personal data. The power to introduce custodial sentences of up to two years exists but has not yet been activated. The maximum penalty is currently a fine of up to £5,000.

The response said the government “is not yet convinced” that custodial sentences would provide a deterrent. “Many of the offenders who commit section 55 offences opportunistically are unlikely to be aware of the penalty for such offences. Indeed, there is good evidence that the probability of being detected and punished generates deterrence.”

It said the issue also needed to be considered in the context of the Leveson inquiry given that the extent to which data protection laws have failed form part of the judge’s terms of reference.

The response added: “Once the Leveson inquiry has reported, we will be in a better position to consider the wider implications of any change to the penalties available to the courts in this area.”

Justice committee chairman Sir Alan Beith MP said: “This is a disappointing response in the light of the Information Commissioner’s clear statements that his enforcement capacity is limited by the absence of a custodial sentence for the most serious cases of abuse of personal information.

“It is likely that ministers will have to return both to this issue and to the issue of referral fees in areas other than personal injury, where they are taking welcome action.”

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