Price Transparency

Price Transparency

Introduction

Surveys, and the statistics they produce, are unusual things. Often two surveys into the same subject can provide two completely differing results and even when they produce the same results, those results can often be used to justify both sides of the argument.

This certainly seems to be something that is borne out by the surveys and statistics being bandied around in relation to the government’s latest plans for price transparency in the legal sector.

A study and report undertaken on behalf of the Competition and Market Authority (CMA) concluded that the legal services market was not working well for consumers many of whom lack experience in the market and find it difficult to make informed choices because, mainly, they do not have information relating to price, service and quality. Of those surveyed, 85% wanted better access to information before deciding as to who to instruct to undertake their legal services – with 53% wanting information relating to price and 37% wanting information about the quality of the service they would receive.  Apparently, according to the survey, people’s awareness increased and they were better able to make decisions when provided with clear information.  Very much the sort of conclusion one would expect and the main one being used by the Solicitors Regulation Authority (SRA) to justify its latest price transparency proposals.

The Law Society (the Society), however, who have their doubts about the SRA’s price transparency proposals, have commissioned their own research which, it would appear, indicates that the public will not benefit to any great extent from increased information.  The Society believes that the SRA’s proposals don’t adequately consider the reality of consumer behaviour and that consumers’ “behaviour and understandings when considering legal services are complex and nuanced.”

Indeed, the Society believes that the SRA’s proposals could, in some cases, actually hamper the consumer’s ability to make a reasoned and sensible decision, if only because the “complexity and unpredictable nature of legal services, and the range of legal needs of clients, mean that website information will not reflect the reality of clients’ situations and may be misleading.”

SRA Proposals

Whatever the pros and cons of increased information for consumers, the majority of law firms – solicitors included – are going to need to get to grips with the publishing of information over the course of the next few months.

From December 2018, all regulated law firms will be required to publish information on the prices they charge, and what these cover, across a number of common services.  The requirement to do so will come from the SRA Transparency Rules (the Rules) which are being implemented, so the SRA claim, in order “to ensure people have accurate and relevant information about a solicitor or firm when they are considering purchasing legal services” and to “help members of the public and small businesses make informed choices, improving competition in the legal market.”

The draft Rules form part of the SRA’s Looking to the Future and Better Information proposals, which are designed to give the public more choice and improved access to legal services by making information on price, protections and services more easily available.  The Rules, which have now been approved by the SRA board, have been submitted to the Legal Services Board for approval.  Whilst that may result in some minor changes to the detail of the Rules, it is thought unlikely that changes of any substance will be forthcoming from this.

Rule 1.1 provides that any authorised body or individual practising as a solicitor (specifically in the circumstances set out in regulation 10.2(b)(i) to (vii) of the SRA Authorisation of Individuals Regulations) and who in the normal course of their business promotes the availability of any of the services set out at rule 1.3 (individuals) or rule 1.4 (businesses), must, in relation to those services, publish on its website cost information in accordance with rule 1.5 and 1.6.

In essence this means publishing costs information in relation to:

  • for individual customers – residential conveyancing, probate, immigration (except asylum), road traffic offences, and employment tribunal claims (unfair/wrongful dismissal), and
  • for business customers – employment tribunal claims (unfair/wrongful dismissal), debt recovery (up to £100,000), and licensing applications for business premises.

Rule 1.5 provides that the costs information published must include:

  1. the total cost of the service or, where not practicable, the average cost or range of costs;
  2. the basis for your charges, including any hourly rates or fixed fees;
  3. the experience and qualifications of anyone carrying out the work, and of their supervisors;
  4. a description of, and the cost of, any likely disbursements, and where the actual cost of a disbursement is not known, the average cost or range of costs;
  5. whether any fees or disbursements attract VAT and if so the amount of VAT they attract;
  6. details of what services are included in the price displayed, including the key stages of the matter and likely timescales for each stage, and details of any services that might reasonably be expected to be included in the price displayed but are not; and
  7. if you use conditional fee or damages-based agreements, the circumstances in which clients may have to make any payments themselves for your services (including from any damages).

Additionally, firms must publish certain information on their website.

Under Rule 1.6, cost information must be published in a clear and accessible form in a prominent place on the firm’s  website, and under Rule 2.1 details of the firm’s complaints handling procedure (including, details about how and when a complaint can be made to the Legal Ombudsman and to the SRA) must also be published. Under Rule 3.1, firms without a website must make the information available on request.

There is also a requirement upon firms, contained in Rule 4.1, to publish various regulatory information on its website.  This will includes the firm’s SRA number and the SRA’s “digital badge” (yet to be fully defined).

Finally, Rule 4.2 requires that an authorised body show its SRA authorisation number and the words “authorised and regulated by the Solicitors Regulation Authority” on its letterhead and e-mails whilst Rule 4.3 provides that a solicitor, REL or RFL who is providing legal services to the public or a section of the public other than through a SRA regulated must:

  1. where they are not required to meet the minimum terms and conditions, before engagement, inform all clients of this fact and specify that alternative insurance arrangements are in place if this is the case (together with information about the cover this provides, if requested); and
  2. where applicable, inform all clients that they will not be eligible to apply for a grant from the SRA Compensation Fund.

Rule 4.3 does not apply to a solicitor, an REL or RFL that is working in an authorised non-SRA firm or a non-commercial body.

An onerous burden or a necessary advance?

Whatever your view of the proposals, make no mistake, this a major undertaking and for firms with a large number of different pricing bands or work types could prove very difficult to achieve with any degree of clarity.  For small firms it is yet another regulatory requirement to be absorbed into an already very busy practice.

It should be noted that the requirements of the Rule go much further than simply putting on a website a vague estimate of what a firm will charge.  The Rule requires a detailed breakdown not just of the cost of the services but also the amount of the disbursements, whether disbursements carry VAT, what is included within the price, who in the firm will be doing the work and other details such as conditional fees.

The problems and difficulties is something which the Society has been keen to draw to the attention of firms.  Indeed they have indicated that they oppose the proposals on the basis that:

  • solicitors are already under a duty to ensure that clients receive the right information at the right time in order to make informed choices. Outcome O(1.13) provides that “clients receive the best possible information, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of their matter” whilst Outcomes O(1.9) and O(1.10) provide that clients “are informed in writing at the outset of their matter of their right to complain and how complaints can be made” and “are informed in writing, both at the time of engagement and at the conclusion of [the] complaints procedure, of their right to complain to the Legal Ombudsman, the time frame for doing so and full details of how to contact the Legal Ombudsman”,
  • non-regulatory approaches to providing better information for clients are more responsive to client demands,
  • the SRA’s proposals don’t adequately take into account the reality of consumer behaviour, and
  • the complexity and unpredictable nature of legal services, and the range of legal needs of clients, mean that website information will not reflect the reality of clients’ situations and may be misleading.

Aside from the problems that firms will have in displaying the information, the proposals suffer from one major flaw and that is that they assume that the public will be able to interpret the information provided.  It is all very well the SRA requiring that the information be “clear and accessible and in a prominent place on your website”. However, the information to be provided will inevitably be complex, will not be able to take account of all variables, is likely to create unrealistic expectations on the part of those clients who misunderstand what is being said and could reduce the flexibility of firms in the way in which they handle matters.

Equally as important is that fact that, since the Rules do not stipulate specific pricing models, methods of display, categories of information it will be very hard for the public to compare one firm’s information against that of another.

What Should Firms be Doing?

Implementation of the provisions is set for December 2018, so in reality firms do not have long in order to decide how they are going to approach this and what they will do.

Of course, a problem is that until there is more information on some of the proposals, and until there is certainty as to the wording and content of the Rule, then it is hard to take any steps.

However, some preparatory steps may be able to be taken by firms. These might include:

  • for those firms with websites, thinking about how and where on the web site the information will be displayed. This might be more difficult for firms with vary basic or outdated websites or those whose websites are based on simple templates that they would find difficult or expensive to alter.  Issues to be considered could include:
    • where on the site the link(s) to the information will go,
    • whether that information is to be static or dynamic – in other words will the site contain example scenarios or will the client be able to input their own data to receive a quote,
    • how the information will be kept up-to-date, and who within the firm will be responsible for this,
    • whether there is a third party responsible for maintaining the website and how they will carry out the updating,
    • whether the website will need to be updated generally in order to allow the firm to display the information.
  • for those firms without websites, how they will make the information available to clients – pre-printed documents, one of letters, emails etc.;
  • how the information is to be produced. A price estimate will only work if there is a means by which the firm can access and collate information so firms need to start thinking about, if they don’t already have a system, what information they need from a client or potential client that could have an impact upon the price charged.  Thus, in a conveyancing transaction, this might include knowing whether a client is a first-time buyer, the value of the sale or purchase, whether the property is freehold or leasehold, whether a mortgage is involved, whether there are multiple owners, whether it is a remortgage and so forth.  Most firms will do this already – the difference now is that the questions will need to be coordinated across the firm and across matters so that some pricing certainty can be achieved;
  • carrying out some form of regularisation of fees across the firm;
  • recording the experience and qualifications of those carrying out the work, and of their supervisors, so that this can be made available to clients;
  • working out what disbursements the firm tends to need to charge in relation to different transactions. For example, if the firm undertakes a lot of work in an area where coal mining or brine subsidence searches are needed then that will have to be factored into the information provided;
  • documenting what is typically involved in the services being offered , how long they will take and the types of factors that could cause those details to vary;
  • Whether it is worth the firm subscribing to any of the existing quotation software services that are available. These include services such as Hoowla (hoowla.com/conveyancing-calculator/) , Quote Express (www.quotexpress.co.uk/), Conveyancing Calculator (www.conveyancingcalculator.co.uk) or Online Conveyancing Quote (www.onlineconveyancingquote.co.uk/).
  • What the firm should be doing, if anything, in relation to price comparison websites such as ReallyMoving (reallymoving.com), Conveyancing Quote Now (www.conveyancingquotenow.co.uk/) and Uswitch (www.uswitch.com).
  • Thinking about differentiation. If firms are all producing pricing information then there is a danger that the public will choose those who are the cheapest.  Firms who do not want to compete on price alone need to be giving thought as to how they will differentiate themselves from those firms who are going into the market as the cheapest.

Conclusion

There are, as ever, arguments for and against price transparency.  Where services are simple, capable of being standardised and largely similar in pricing models throughout the country, then transparent and open pricing is not really an issue. However, where services are complex, where there are variables which can be outside and within the client’s control, where the time the services take to provide are to an extent determined by the understanding of the recipient of those services – then price transparency becomes harder to justify.

For many firms, this will act as a wakeup call and encourage them to move onto new pricing models which can take account of different factors yet still provide certainty.  For others it will simply throw them into a price war with competitors many of whom are not operating from a level playing field.

There is not a great deal out there to assist firms at this stage with planning their price transparency activities.  The law Society have produced a “Price and Service Transparency Toolkit” (www.lawsociety.org.uk/support-services/advice/articles/price-and-service-transparency-toolkit/) and businesses such as QuoteExpress (www.quotexpress.co.uk) offer some assistance. It is probably a case of watch this case and make sure that you plan sufficiently ahead to be able to comply with the Rules.

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