Law firms involved in debt recovery work have been warned by the regulator to ensure they have proper control over what is being done in their name.
The Solicitors Regulation Authority has seen an increase in cases where solicitors working with debt recovery companies are in danger of breaching the Code of Conduct.
The Solicitors Disciplinary Tribunal has recently handed out fines and costs orders totaling £140,000 for two separate incidents of solicitors failing to maintain their independence.
The SRA has produced a warning note advising firms on putting their independence at risk, or being involved in overly aggressive or misleading correspondence.
David Middleton, SRA executive director for post-enforcement, said: ‘While we are committed to working constructively with firms, we will take enforcement action against regulated persons who fail to address the issues and risks associated with debt recovery work. We expect firms to ensure they supervise all work their name is attached to.’
In the first of the SDT cases referred to, the tribunal found the nature of the solicitor's arrangement with a debt recovery company was wholly irresponsible and had resulted in a breach of his regulatory duties.
In particular, the referral arrangement compromised the solicitor's independence and ability to act in the best interests of clients.
The tribunal was particularly concerned with a feature of the arrangement which had facilitated the conduct of litigation by the debt recovery company when it was not permitted to do reserved legal activities. The solicitor was fined £40,000 and ordered to pay costs of £35,000.
In the second case, the tribunal decided that the solicitor's relationship with a debt recovery business compromised his integrity and his independence. The arrangement meant the solicitor had recklessly misled the court by facilitating the conduct of litigation by the debt recovery company.
It also gave the misleading impression the solicitor was responsible for conducting litigation which was actually being dealt with by the debt recovery company. The solicitor was fined £15,000 and ordered to pay costs of £50,000.