The Legal Services Board (LSB) has announced proposals to improve the regulation of referral fees and arrangements. The proposals, which are subject to a 12 week consultation, will inform a final decision paper to be released in the second quarter of 2011 and are the culmination of a comprehensive programme of evidence-gathering both inside and outside of the legal services sector.

The LSB’s proposals reinforce the findings of the Consumer Panel by stopping short of an outright ban on referral fees and arrangements. The package does, however, recommend a detailed set of clear disclosure and transparency requirements for those who enter into these arrangements ? designed both to give the consumer better awareness of the details behind the transaction and to secure a more consistent approach to transparency across the sector. They can be summarised as reveal, regulate, and only then, retain.

David Edmonds, Chairman of the Legal Services Board, said:

There has been long-running debate around these issues. But empirical evidence has been lacking. The proposals we are making today are underpinned both by economic analysis across the market, and by investigation of consumer attitudes.
As a regulator we are committed to proportionate intervention. Our hypothesis is that neither an outright ban nor a laissez-faire free-for-all would be appropriate. Instead, we suggest that clear obligations on transparency would preserve the beneficial impacts of the arrangements, whilst addressing the conditions that underpin concerns about consumer choice and transparency. Final decisions will rest on responses to this consultation.