Solicitors' referral fees should be made transparent, says legal body
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Brokers could be forced to disclose to customers the referral fees they receive from solicitors if proposals by the Legal Services Consumer Panel are adopted.
The body has made the recommendation in its submission to the Legal Services Board which is compiling evidence on changes to referral and arrangement fees.
The panel says a ban on referral arrangements between conveyancers and introducers such as brokers would not be in consumers’ interests but calls for tighter regulation of such deals.
It recommends that disclosure arrangements should be tightened, including the possibility of needing a client’s written consent prior to making a referral.
But the panel says there is no evidence to support the charge that referral arrangements compromise the independence of legal advice or lead to more expensive or lower quality service.
Eddie Goldsmith, senior partner at Goldsmith Williams, says the recommendations are sensible and proportionate. He says the non-disclosure of fees can undermine the relationship between introducers and clients.
Goldsmith says: “Full disclosure ensures clients appreciate the role played by intermediaries in helping their mortgage applications move swiftly to completion. It’s right that brokers should be remunerated for the work they do.”
Dianne Hayter, chair of the Legal Services Consumer Panel, says consumers are sometimes surprised that legal firms pay referral fees.
She says: “They are willing to tolerate this as long as such transactions are conducted in the open. Greater transparency combined with tough action on rule-breakers is needed to ensure referral fees work in the interests of consumers.
“As long as the issues identified in this report are tackled referral fees have a place in the legal services market.”
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