Law Society looks to ban referral fees
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The Law Society has started lobbying the government and the Legal Services Board to ban the payment of referral fees by the legal profession.
If successful, this move may bring an end to the payment of fees for referring any type of legal work including conveyancing, will writing and claims management cases.
Eddie Goldsmith, senior partner at Goldsmith Williams, says the decision could impact mortgage brokers heavily.
He says: “If it does ban referral fees it would impact a lot of mortgage brokers who have arrangements with solicitors and claims firms.”
He says a lot of high street practitioners feel they are losing out to other firms who are prepared to pay for the work.
The Law Society Council, which represents all UK solicitors, has adopted a motion to ‘make representations to government and the Legal Services Board that referral fees do not have a place in markets for legal services’ and that they should be banned.
However, it is the Solicitors Regulatory Authority and not the Law Society which has the power to change the rules and the motion will therefore be subject to a period of consultation over the coming months.
In its motion to the council, the Law Society says: “As referral fees have the potential to limit access to justice and reduce the quality of legal services, the Law Society should make representations to government and the Legal Services Board encouraging the banning of referral fees by all providers of legal services.”
Goldsmith adds: “It’s difficult to understand why the Law Society wants to ban the payment of referral fees, when it made a policy decision to allow them just five years ago. The existing rules governing fees are clear, require full transparency and in our experience at Goldsmith Williams, which spans 25 years, we have not received a single client complaint regarding referral fees.
“Clearly, the most important issue is ensuring clients understand that fees are being paid and that they do not disadvantage clients in any way or restrict their choice of legal representation. I have no doubt the SRA will consider this issue very carefully.”
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Readers' comments (26)
James Lindon-Travers | 18 Nov 2009 11:40 am
Any referral fee is disclosed by the Solicitor to the client. In my experience my clients are happy with this, as the lawyer I refer to does an excellent job for a good value all in price. Don't you think brokers have been kicked in the teeth enough recently!!
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phil | 18 Nov 2009 11:47 am
have the Law Society been talking to the FSA??
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Tim Robinson | 18 Nov 2009 11:49 am
What is going on here, why are the "authorities" attempting to stop every source of revenue a mortgage broker receives?
We have built up a number of very strong working relationsships with Legal firms which are mutually beneficial to both sides.
All our clients know how much and why a referal fee has been paid.
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Bob Bhalla, Solicitor, Gordons Property Lawyers | 18 Nov 2009 11:52 am
Like Eddie we are a solicitor's practice which pays referral fees too and never have had a complaint regarding these.
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michelle ashworth | 18 Nov 2009 11:52 am
I think its part of a conspiracy to wipe out mortgage brokers!!
How do they think the business world operates. I for one earn my referral fees by managing the transaction, completing all the neccessary paperwork and ensuring my clients recieve the service that they deserve. bah humbug to the law society
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Dave Rolleston | 18 Nov 2009 11:55 am
So will they ban advertising next?
Referal fees paid through sites such as eConveyancer are essentially a marketing fee.
Solicitors need to realise that they are retailers who are very much in competition with each other to win business. If they can come up with a marketing model that incorporates referal fees instead of spending thousands of pounds on advertising then good for them.
It will be interesting to see if the Law Society also insist that the savings that the law firms will make by not paying referal fees will indeed be passed onto the consumers - the synic in me says not.
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Stuart Rathbone | 18 Nov 2009 11:56 am
Smacks to me of a cosy club not wanting to be exposed to the cold hard wind of market forces and competition.
Can’t blame ‘em though we all want an easy life. They just need reminding that the only constant is change.
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Steve Rodley | 18 Nov 2009 12:01 pm
I think I have just lost the will to live never mind lost the will to be a mortgage broker!!!!!
Please, someone tell me how we are supposed to make an honest living?????
It is not the humble broker that is at the root of all evil but the BANKS!!!!!
We work hard for a living and are as professional as any other sector but get downtrodden at every possible opportunity!
I wonder if First need any Bus Drivers?????
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Gary Fairhall | 18 Nov 2009 12:05 pm
Outrageous, this is how the real world works! Brokers are suffering enough with loss of incoem streams. What do a few old boys understand about the real world of activity, commission and sales? or go hungry!
about time they retired to their country manor!
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Paul Turner | 18 Nov 2009 12:05 pm
Can I politely suggest that The Law Society and those looking to restrict brokers income even further, get a life. Welcome to the 21st century boys. The government, FSA and all other regulatory bodies have created a society where there are no 'free lunches' . . . . We all have to pay our way through this life whether its personal or commercial. Banning referal fees will hurt solicitors far more than it will hurt brokers . . . we'll just direct everything through the 'free legals' channels that Lenders operate . . . . and if I'm not mistaken, the panel solicitors pay for that as well by reducing their fees to get on the panels. I bet they don't ban that practice !!!!
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