Banning referral fees will harm the legal profession and have no effect on reducing law firms’ marketing costs, according to Darren Werth, the Claims Standards Council’s chair.
Werth, managing director at Accident Advice Helpline, told delegates that it is ‘shocking’ that the Law Society and Lord Justice Jackson (pictured) want to ban fees. ‘It will drive businesses underground,’ he said, creating ‘a future not in line with a modern commercial world’ by ‘legislating against market forces’.
The Legal Services Board’s consumer panel recently commissioned management consultants Charles River Associates to undertake an economic study of referral fees. Jackson and the Law Society want to ban referral fees, while the Solicitors Regulation Authority said last week that it ‘supports and is contributing to the cross-sector review of referrals by the LSB’.
Werth said: ‘In any economy where solicitors run businesses for profit, they need referrals. Solicitors don’t market their businesses very well. If a solicitor spends half of his marketing budget with an advertising company and the other half with a claims management company, which is the bigger evil?’
Abolishing referral fees would have no impact on marketing costs, he added. ‘There would be far less competition in the marketplace with only large firms surviving. You outsource to the most effective provider, which will most likely be a CMC.
‘It’s ridiculous to single out referral fees as some kind of problem. Jackson fails to recognise the millions of pounds that CMCs have spent on promoting access to justice. There has been no government-led campaign on this.’