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Legal Service Board approves CLC’s approach on referral fees

8 August, 2013

A CLC Review found no justification for a ban on referral fees in conveyancing and our proposals for changes to the Disclosure of Profits and Advantages Code to ensure greater transparency have been welcomed by the Legal Services Board. The revised Disclosure of Profits and Advantages Code is now available.

Anna Bradley, Chair of the CLC welcomed the LSB’s decision to grant the CLC’s application to make rule changes in relation to referral fees. She said: “Our review of referral fees in conveyancing found no evidence of consumer detriment – an assessment shared by the LSB and Legal Services Consumer Panel following their own past research. The outright ban on referral fees that some have called for could not possibly be justified on the evidence. We proposed, and the LSB has granted, a proportionate regulatory response. The enhanced transparency requirements we are putting in place empower the consumer to manage the low level of risk themselves.”

The CLC’s position was reached following a review and consultation carried out earlier this year. This was the third such exercise in recent years to reach the same conclusion – the others being research projects undertaken by the Legal Services Board and the Legal Services Consumer Panel that were published in 2011.

During its review, the CLC determined that the biggest threat to the consumer interest posed by referral arrangements was the level and timing of information given to consumers. As a result, the CLC made additions to its Disclosure of Profits and Advantages Code to ensure that referral fees are managed by Licensed Conveyancers in an open and transparent way that is in line with the regulatory outcomes set out by the LSB:

Agreements with third-party referrers should be in writing and subject to periodic review
Clients should be informed in writing of the arrangement’s existence no later than when accepting instructions, or when introducing a client to another person;
Clients should be advised they have a choice of provider
The client should be informed of the nature of the arrangement (including any payment made), with whom it is made, and any impact (including any legal costs they are charged).
These proposals also take into account points raised by Licensed Conveyancers and others during a consultation exercise in early 2013 about making sure that the client is empowered through full knowledge of arrangements.

View the revised Disclosure of Profits and Advantages Code – the changes are highlighted in yellow