Legal and competition authorities are at loggerheads over referral fees, with the Master of the Rolls saying that allowing them was a mistake and the Office of Fair Trading (OFT) insisting it is 'highly unlikely' that a ban could be reimposed.

The Law Society Council will see letters from both this week as it considers a regulatory impact assessment from the standards board on reintroducing the ban, as requested at its May meeting. The board reiterated its view that there is insufficient evidence to justify such a move.


The Master of the Rolls, Lord Phillips of Worth Matravers said he personally sympathised with the view 'that permitting the payment of [referral] fees was a mistake'.


He identified as particular concerns the increase in cost to the client as a result of referral fees being passed on and damage to the profession's reputation.


However, the OFT said it is highly unlikely 'that a reintroduction of the prohibition could reasonably be considered necessary in order to achieve the identified objective of avoiding interference with the independence and integrity of solicitors'.


Instead, it backed standards board proposals to ensure that solicitors and potential clients are fully aware of the requirements for referral fee arrangements and that they are complied with.


The board also commissioned pollster ICM to interview 5,035 conveyancing clients, which revealed that satisfaction with solicitors was fairly high overall (about 75%) but tended to be lower among those who were referred.


It found a strong belief that solicitors act in the best interests of the client, but again, ICM found, 'this was less strongly felt among those who were referred'. Nonetheless, the public did not have strong principled objections to referral fees, and there was evidence that the experience of those who had been referred was largely positive.


The standards board recommended waiting for the incoming regulation board to re-examine the matter early next year. However, if the council does not want to wait, the board said it should consult on a ban on referral arrangements with introducers who have a continuing interest in the transaction, such as estate agents. This course is also advocated in two private member's motions.


The board claimed that reintroducing the old ban would bring back the enforcement problems that contributed to the change in the first place, while a total ban would catch marketing schemes such as Accident Line.


The Association of Personal Injury Lawyers said a ban would have 'enormous' business implications for firms, while clients would suffer by being driven into the arms of unqualified claims handlers.


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