LSB publishes referral fee decision

LSB publishes referral fee decision

The Legal Services Board has now published its decisions about the future regulation of referral fees in the legal services market marking the end of a review, based on detailed economic analysis, research into the views of consumers and formal advice from the Legal Services Consumer Panel.

During 2010, the LSB consulted on preliminary recommendations to manage the impact of referral fees and prevent abuses by strengthening transparency obligations, rather than seeking a simple ban on the arrangements.

Following consultation, the Board?s final decisions endorse this approach. The Board is also providing more flexibility to the approved regulators in the sector on how to secure the right outcomes for consumers across different parts of the market.

The new guidance requires approved regulators to make sure that consumers know when referral fees are in operation and to whom they are being paid. The approved regulators will also need to improve regulatory policing of lawyers? obligations.

The approved regulators will be free to enact measures that they consider best suit their part of the market in achieving these outcomes. However, when considering applications by the approved regulators to change their regulatory arrangements, the LSB will take into account the extent to the consumer outcomes are served.

Additionally, to ensure requirements remain fit for purpose in a rapidly changing market, the Board will undertake a thematic review in 2013-14 of the approach to the regulation of referral fees.

David Edmonds, Chairman of the Legal Services Board said:

“Before this exercise, the debate on referral fees was characterised by high passions but a lack of hard evidence. Following this detailed investigation, we are persuaded that the interests of consumers are best served by continuing to permit referral fees, but managing their impact through shining the light of transparency on them.

“We have set out a range of measures that can help achieve this ? with the approved regulators free to choose what is best suited to their part of the market. Whilst they will have the flexibility to tailor action, securing these outcomes is essential and we will track progress carefully over the coming months.”

The decision document can be downloaded from the LSB web site at www.legalservicesboard.org.uk/what_we_do/consultations/closed/pdf/20110525_referral_fee_decision_paper_final3.pdf

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