Studies of the legal sector have found that around one in 10 services are provided for individuals by unregulated firms. But the Legal Services Board, which conducted the research, has stated that the scope of the unregulated sector is unlikely to be wide enough to prompt a full statutory review into its impact on the market.
The oversight regulator’s business plan for last year confirmed plans to better understand the unregulated sector and to look at any changes in regulation that might be needed. The sense was that the public was confused about the boundaries of regulation and concerned about the lack of redress for customers of unregulated services.
A draft report based on analysis of the sector found that unregulated firms catered for 9% of the total market for individuals’ legal needs and up to 39% for small businesses. In some areas such as will-writing the market share was likely to be much higher.
Data from Trustpilot showed that levels of satisfaction were high for both regulated and unregulated providers, although those using an unregulated provider were more likely to report dissatisfaction. In complaints about unregulated providers to Citizens Advice, consumers cited higher than expected costs, unreasonable delays and poor advice.
There have been repeated calls for greater regulation of the wider legal services market, including a register of providers and guaranteeing access to the Legal Ombudsman for customers who complain about poor service.
The LSB said its research suggested the unregulated market is ‘sizable’ and has a significant market share in some areas, but evidence obtained does not provide a ‘compelling case’ for a full statutory review of the sector at this time. Further work will go into whether a targeted review is warned for a specific area where problems are identified.
Instead, in the short term, the LSB proposes to enter voluntary arrangements for unregulated firms to sign up to a register of accredited providers. The organisation will also push access to alternative dispute resolution in the unregulated sector.
‘There is merit in further exploring the feasibility of pursuing voluntary arrangements,’ the LSB stated. ‘We propose to engage with other regulators (such as the Professional Standards Authority) to discuss their approaches to similar powers. We also propose to engage further with those in the unregulated sector to test whether there is appetite for the LSB to provide assistance in the development of voluntary arrangements funded by unregulated providers.’