Key long-term protection that ensures consumers of legal services can obtain compensation for transactions – such as home buying, wills and child injury cases – where a problem cannot arise that several years later should not be abandoned by the regulator unless and until an appropriate alternative arrangement is in place.
In a rare move, the Legal Services Consumer Panel (LSCP) and the Law Society of England and Wales have joined together to oppose plans by the statutory regulator, the Solicitors Regulation Authority (SRA), to weaken consumer protection.
The SRA wants to lose the Solicitors Indemnity Fund (SIF), ending that long-term protection with nothing to replace it.
SIF currently provides additional liquidation coverage to businesses that have closed, providing continued long-term protection for clients.
The SRA has indicated that its preferred option is to shut down the SIF, saying the cost of operating it, relative to the volume and value of claims, is disproportionate to the consumer benefits it provides.
He accepts that some consumers will lose out, but argues that the average successful claim of £34,000 is “modest”.
He did not show how the end of this protection has any benefit for consumers, whether in terms of reducing the price of legal services or increasing consumer choice, and his suggestion that the Law Society, as a representative body of the profession, could offer a similar level of consumer protection through a newly created fund is misleading.
The Law Society backs the pursuit of SIF as long-term consumer protection, backed by a tax on law firms of £240 a year, which it calculates would have no significant impact on fees billed to consumers.
The LSCP agrees that the fund should not be closed, particularly while it still contains assets, until other arrangements are made to provide consumers with similar protection.
The President of the Law Society of England and Wales, I. Stephanie Boyce, said: ‘It is a sign of the seriousness of the concern we all have by the SRA’s proposal that the body representing the interests of consumers of legal services associates itself with the organization representing legal service providers. these services to attack the statutory regulator.
“Our profession is happy to pay for SIF. Any indirect cost to consumers will have negligible or no impact on the price of legal services – but even if they were, the increases would be minimal, measured in tens of pence.
“People turn to lawyers for help and advice during the most important events in their lives: the death or injury of a loved one, family breakdown, buying a house or estate planning.
“They are so confident in the assumption that lawyers are highly qualified and regulated. In the rare event that something goes wrong, consumers believe that their lawyer is sufficiently and properly insured and that they will be compensated for any loss.
“Terminating the SIF would immediately stop the long-term protection of consumers exposed to long-term risks.”
Sarah Chambers, Chair of the Legal Services Consumer Panel, said: “It is true that the administration costs of this fund seem remarkably high given the number and level of claims paid.
“Nevertheless, we remain very concerned that the proposal to close the fund may be put forward without due regard to the impact on consumers of ‘unknown’ mistakes made many years ago, and how protection could be maintained by continuing the fund or replacing it with an alternative that offers a similar level of protection.The SRA should think again.
Notes to Editors
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About the Law Society
The Law Society is the independent professional body working globally to support and represent lawyers, promoting the highest professional standards, the public interest and the rule of law.
Press office contact: Naomi Jeffreys | 020 8049 3928
About the Legal Services Consumer Panel
The Legal Services Consumer Panel was established under the Legal Services Act 2007 to provide independent advice to the Legal Services Board on the interests of consumers of legal services in England and Wales.
We investigate issues that affect consumers and use this information to influence decisions about the regulation of legal services.