Legal body calls for disclosure of referral fees
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The Legal Services Board Consumer Panel says a ban of referral arrangements between conveyancers and introducers such as mortgage advisers would not be in the consumer interest, but it has called for tighter regulation.
It recommends that disclosure arrangements need to be tightened, including the possibility of needing to obtain client consent prior to a referral.
The report follows the publication of a research study in May this year, which concluded that conveyancers who pay referral fees provide a faster and higher quality service and charge lower fees to clients, than firms who don’t pay referral fees.
The Consumer Panel has concluded that there is no evidence to support the charge that referral arrangements compromise the independence of legal advice or lead to more expensive or poorer quality service and that referral arrangements should be allowed to remain in place.
However, it has recommended that further work needs to be done to tighten disclosure rules, including a potential requirement to obtain a client’s written consent to a referral.
Eddie Goldsmith, senior partner at Goldsmith Williams, says “The recommendations made by the Legal Services Board are both sensible and proportionate and they are right to emphasise the importance of proper disclosure.
“Non-disclosure of referral fees can not only result in severe sanctions, but perhaps even more importantly it undermines the relationship which exists between an introducer and their client. At Goldsmith Williams, we believe that full disclosure ensures clients fully appreciate the important role played by intermediaries in helping their mortgage application move swiftly through to completion
“It is right and proper that brokers are remunerated for the work they do.”
Dianne Hayter, chair of the Legal Services Consumer Panel, says: “Consumers are surprised, even shocked, that lawyers pay referral fees, but they are willing to tolerate this so long as such transactions are conducted in the open. Greater transparency, combined with tough action against rule-breakers, is needed to ensure that referral fees work in the interests of consumers.
“Referral fees have their problems, but they can increase access to justice, while not raising prices or reducing the quality of advice. So long as the issues identified in the Panel’s report are successfully tackled, referral fees have their place in the legal services market.”
