If, like us, you are exhausted by the past couple of weeks’ news stories, you might appreciate the relative light relief of this risk and compliance update. We’ve included our ‘must reads’ below, then it’s off to France we go for a short holiday.
Breaking: CMA interim report
The Competition and Markets Authority today delivered its interim report on the legal services market. For those not paying attention, the ‘cartel watchdog’ was looking into whether consumers are able to get a good deal through competition in the marketplace.
The report concluded that although the legal service market is not perfect, the CMA does not intend to move to a formal investigation. Price and quality transparency were highlighted as being lacking, and we could well see further calls for lawyers to publish more and more information. (See also ‘Legal comparison sites and open data’ below).
Equally significantly, the CMA is in favour of a fully independent SRA.
Why it’s important
The report adds serious weight to the SRA’s claim to full independence from the Law Society. There will be some uncomfortable conversations in Chancery Lane about future funding, no doubt.
It also provides justification for the government to look more closely at ‘alternative regulatory models’ less reliant on professional titles. Is this paving the way for a Legal Services Act 2.0?
Of more practical concern to individual firms – what sort of information are we going to have to provide? How accurate is that data, and will it give potential clients an accurate picture of the firm? How do you give pricing information if we do not offer fixed fees?
Potentially difficult issues to grapple with on the horizon.
Another scam to look out for!
The latest in a long line of frauds targeting solicitors involves subscription ‘refunds’. The criminals pose as a supplier and try to convince the firm that they have been unable to process a refund for banking or IT failures. Then, ever so helpfully, they ‘suggest’ that the firm hands over their banking details so that the payment can be made. You know what happens next.
Why is it important?
When we hear more and more of these warnings, as well as becoming desensitised to them, it’s easy to dismiss them because they sound so obviously like a scam. “It could never happen to us!”. It is becoming clear, however, that these people are skilled criminals and are well trained and organised. They use social engineering and strong persuasion tactics to gain the trust of otherwise intelligent people. It would make sense to train anyone with access to your bank details on the warning signs of fraud. It’s also worth checking whether your ‘cyber’ policy covers these types of losses.
The PII industry is clearly getting very nervy about the scale of the problem, and we would not be surprised to see them asking more probing questions about fraud and cybercrime safeguards.
You can read more about this story here
Legal comparison sites and ‘open data’
The Law Superstore recently announced that it will be open for business from August. 150 firms have signed up to the comparison site, which will rank them on quality, location, price and service.
In related news, the Legal Services Consumer Panel has recently published a report renewing its call for lawyers to publish data (e.g. pricing and complaints) to enable more educated purchasing decisions. The panel sees this open approach as key to a properly functioning legal market.
Why is it important?
The Law Superstore may or may not gain traction with lawyers and clients, but it certainly underlines an inevitable shift in the way that people buy services. We dismiss these new entrants at our peril – look what has happened to the insurance broker market.
And whatever we think of the Legal Services Consumer Panel (they sometimes seem to delight in talking down the profession), it must be true that most clients would probably welcome more information about their lawyer before they instruct. Take hygiene ratings on take-away shops, for example. Most people would be more inclined to buy from a 4 than a 2 thereby, the theory goes, putting positive pressure on the industry to improve standards.
Complaints data is one easy metric that we have, although as we have seen with the Legal Ombudsman’s name-and-shame list, it is a blunt tool. (It does not differentiate between the sole practitioners and huge national firms, for example). Quality standards, feedback scores, and accreditations all have their place in building the ‘trustworthiness’ of a law firm.
Open pricing is more controversial – buying a legal service is not the same as buying a tin of beans. As the conveyancing industry has proved, competing on price is a dangerous business model.
Are unregulated providers the way forward …..?
In related news, the Legal Services Board (LSB), recently reported that unregulated legal services providers can be ‘cheaper, more innovative and more transparent with their prices’ than their regulated counterparts. Their research suggests that unregulated private client and matrimonial providers had the lowest prices, often by fixed fee quoted online.
Why is it important?
We were astounded and concerned that our super-regulator is openly advocating the virtues of unregulated legal providers. As the Gazette pointed out: ‘OF COURSE THEY’RE CHEAPER, THEY’RE UNREGULATED‘. It doesn’t take a genius to understand that there is no link between price and quality, and it entirely misses the point of regulation i.e. public protection.
This seems to be part of a bigger trend of the regulators stepping into free market issues (see for example SRA Innovate), rather then concentrating on public protection, standards and ethics.
A bit of good news to finish …..
The Law Society has proposed a fee cut of 9% for practising certificates in 2016/17. This could amount to £30 per solicitor. With the SRA, Law Society, Legal Ombudsmen (LeO) and Legal Services Board (LSB) all looking at ways to reduce costs of their work, this means the difference can then be passed on to the profession – a welcome piece of news!
You can access the fees calculator to give you an indication of renewal costs.
Why is it important?
Every little helps, right?
Law Society – practice note updates
20 June 2016 – Trust corporations
16 June 2016 – Data protection