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Law Society statement on referral fees

Following on from a number of articles on this blog, on the subject of referral fees, we wanted to update you as to the Law Society’s most recent comment.

Commenting on the announcement of a Government ban on referral fees in personal injury litigation, Desmond Hudson Chief Executive of the Law Society said:

‘The Law Society is delighted that the government has listened to the strong case it has been making for a ban of the payment of referral fees in the field of personal injury litigation.

“The Society has been calling for just such a ban for two years and it is pleased that the arguments it has made to Ministers have finally been listened to.

“However, the Society remains concerned that the ban is handled in a careful and considered way as the scope for unintended consequences is very high. Many law firms have reluctantly had to base their business models on the payment of referral fees as the actions of insurers and claims management companies meant they were forced to do so.

“The Government will need to ensure that enough time is given for the market to adjust to the ban. The Society also strongly rejects any attempt to reduce or ban legitimate marketing of the services of law firms as the public have a clear right to know what their rights are if they have been injured or wronged by the negligence of others.

“We believe that the Ministry of Justice is therefore right to consider carefully how to proceed, particularly in respect of definitions.

“The Society is however disappointed that the ban will not be extended more widely – for example into the area of conveyancing. The Society believes this approach is short-sighted and does not recognise the clear potential for consumer detriment that exists in respect of one of the most important transactions most people make in their lives.

“Consider this, I appoint an estate agent to sell my house, I pay his fee, without my knowledge he sells my case to a conveyancer. How is that in the interests of the consumer? The Society has written to the Department of Business, Innovation and Skills asking them to reconsider and will be pressing the Government to include a general prohibition on referral fees throughout the legal sector. Referral fees are not in the public interest.’

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