Regulators – and not the businesses affected - must take responsibility for ensuring the right messages are given to new clients using unregulated providers.
The Legal Services Consumer Panel responded after the oversight regulator, the Legal Services Board, yesterday approved plans for qualified solicitors to practise in unregulated businesses.
The panel had warned in advance about increasing complexity in the system, and ensuring safeguards for clients using providers who may not have insurance or give access to the Legal Ombudsman.
Now the decision has been made, the panel has demanded that consumers be given the full picture, and that it be made clear they will not have access to the compensation fund or insurance cover if something goes wrong.
There must be ‘no ambiguity’ in communication to consumers prescribed by the SRA, it said, and the regulator must take an active role in making sure the right message comes across.
Sarah Chambers, chair of the panel, said: ‘The SRA must fulfil its duty to consumers by focusing on their needs before purchasing services from solicitors in unregulated businesses. It should have a clear communication strategy, informed by consumer testing.
‘More importantly, the practical obligation of crafting the message that will be presented to consumers must fall on the SRA, not unregulated businesses. The SRA must also stipulate clearly and unambiguously, the points at which consumers must receive this information.’
The panel added it was ‘imperative’ that the LSB also takes responsibility for monitoring this shift in regulatory policy, and that the changes are properly assessed within two years.
The LSB said yesterday that relaxing the rules presents some potential risks, but these were not enough to reject the proposal. Instead, it found merit in the SRA’s argument that changes could be seen to increase consumer protection, given that many consumers already use unregulated providers and have no regulatory protection at present.
The Law Society said regulators had ‘sacrificed the best interests of the public’ , with the most vulnerable consumers ‘likely to fall foul’ of the liberalised system.