Referral fee ban is SRA's mission impossible
As any lazy person knows (I’m told), it’s pretty easy to get out of doing a job you hate. Just moan incessantly about having to make the tea/clean the bathroom/take a trip to Westfield, to the point where you’ll never be asked again. If all else fails, do such a botch job that you’ll never be asked again.
Now is it me, or does the SRA seem distinctly reluctant to police the ban on referral fees?
Today’s discussion paper outlines how the ban will be difficult to enforce and nigh-on impossible to define.
The problem from the start for this ban has been in its execution. It’s difficult to argue that referral fees are an ugly blemish on the legal profession, creating an unnecessary and costly third party whose sole intention is to find (or manufacture) as many claims as possible.
Law firms are forced to dance with the devil or leave the party altogether, paying for the work that keeps them in business. It’s become a game of pass the parcel involving accidents victims’ details, with a prize at every stage of the game.
Where the government has never quite nailed the ban is in the detail. It’s easy to spot a referral, or a payment, but how do you decide whether the payment is for the referral?
If a group of law firms clubs together to pay an advertising agency to bring in work, is that any more morally acceptable than paying referral fees to a claims management company? Probably not – yet the government has no intention of preventing this type of arrangement.
Law firms cannot produce clients out of thin air – there has to be a process of paying to attract more work. Who receives this payment is surely a matter of semantics.
Even more impossible to tackle is the ABS-shaped elephant in the room. Quite simply, if a claims management company can no longer receive fees from a law firm, the two entities can simply merge together and do it all in-house. These fusions will be inevitable - undoubtedly against the spirit of the ban, but crucially not the wording.
The SRA is quite clear: as long as there is no threat to the public interest, there is no way of preventing this arrangement. If the government really wants to cut out spurious and fraudulent claims, this is surely not the way to go about it.
The ultimate problem with a ban on referral fees is that the genie has long since escaped the bottle. There are too many companies that make too much money from this system (and too many law firms that rely on this marketing for their very existence).
By 2011, there were 2,533 claims management companies in existence, providing 65% of the personal injury sector’s turnover. This business may be grubby, but it’s bringing in £377m every year to the legal profession.
This is a ban grounded in good intentions but doomed by practicality.
The SRA cannot be expected to police it without more backing and clarity from central government. I wouldn’t blame them for trying everything to get out of this poisoned chalice.
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Comments
referral fee ban
Good article, well reasoned points and i just want to add that so far as preventing fraudulent claims, the criminal justice system is the only way. Is it realistic that a ban on referral fees will concern the people currently manufacturing false claims?
Well, the ban was policed
Well, the ban was policed before, when paying for work wasn't allowed, why not now?
Advertising and marketing are just that, and paying for a referral is paying for a referral-simples.
I hope it will be! The point
I hope it will be! The point I was trying to make was that we're in a very different position to the pre-2004 time. There is simply too much at stake now for the people profiting from referral fee to shuffle off quietly into the night.
the ban on referral fees
The basic problem here, as with most of the knee jerk, insurer lead, government policies, is that it has just not been thought through. Ministers, with no idea how the system truly works, have been persuaded that the referral fee ban is the key to halving insurance premiums (ha ha!).....and have simply passed it to the already overworked SRA, with the brief, "Here you go, now sort this by next April, and don't ask me any questions". Talk about missing the target !!!!!!!!!!!!
The key point is this - if
The key point is this - if law firms are responsible for getting their own work, then they can be held to account over what goes on. Handing over the getting of work to claims farmers is akin to tabloids telling investigators to get information, and then denying that they knew they were hacking phones.
The real point is that the
The real point is that the SRA actually WANT referral fees because it is their vision of what the profession should be. That is why the SRA refused to ban them.
They are now somewhat embarassed (and properly so-such regulation is for the SRA to sort out, not the Government) that Parliament is having to do their job for them -and will raise as many objections as they can to the legislation. No doubt the SRA will lobby hard against the proposals.
The long and short of it is that referral fees should never have been allowed, the SRA should have banned them and if the SRA as presently constituted cannot police what Parliament wants, it should be dissolved and a new body put in place.
The SRA is rather shooting
The SRA is rather shooting itself in the foot here. Everyone else can spot a referral fee a mile off. By claiming that it won't be able to police a ban makes you wonder if they are up to the job.
It does, of course, depend on
It does, of course, depend on what their "job" might be.
On the basis of "by their deeds shall ye know them", their job is to destroy the independence of the profession whilst greatly enriching themselves (see an older comment about the cars in the SRA's carpark!).
On that basis, just like Billericay Dickie, they are doing rather well!