By Anita Rice


Solicitors rather than claims management companies are mainly to blame for personal injury referral deals that breach regulations, the former head of the government's claims management regulation unit Mark Boleat has warned.



Boleat also claimed that the Solicitors Regulation Authority (SRA) is failing to tackle effectively lawyers who break the rules.



The warning came as the current Claims Management Regulator this week suspended 52 claims-handling businesses that failed to respond to its authorisation review at the end of February.



Speaking at the Claims Standards Council conference in Manchester last week, Boleat cited the SRA's own statistics after it examined 149 referral arrangements in place between lawyers and claims handlers at the end of last year.



Following the introduction of regulation for claims management companies in 2007, solicitors are obliged to comply with conduct rules on referral fee arrangements and are banned from taking referrals from unauthorised firms or individuals.

Despite this, the SRA found that in 48% of the arrangements examined, solicitors had failed 'to obtain an undertaking from introducers to comply with conduct codes', while 46% involved 'failure by firms to ensure introducers provided clients with all relevant information'.





Boleat said: 'I would argue that, to the extent that there are problems in respect of the handling of personal injury claims, these are now largely caused by solicitors rather than claims management companies.



'The SRA needs to do more. Almost all personal injury claims still pass through the hands of solicitors, and it is difficult to conceive how claims resulting from large-scale fraudulent accidents can be handled by solicitors in a way which means that the solicitors' conduct rules have been complied with.'



Boleat said the SRA does not have 'the right tools' to combat malpractice effectively because it has to seek lengthy and costly disciplinary sanctions before a tribunal, which 'severely restricts enforcement action'.



He added: 'Solicitors firms involved in malpractice know this and act accordingly.' Boleat went on on to stress that the 'vast majority' of firms had nothing to do with either inappropriately gathered claims or ones that 'may be fraudulent in origin'.



An SRA spokesman said the figures 'demonstrate that the SRA is tackling solicitors who do not comply with their obligations in relation to referral arrangements.'



However, he acknowledged that the SRA's 'current tools are inappropriate and inflexible', noting that the Legal Services Act will enable it to fine solicitors up to £2,000 for breach of conduct rules by the end of this year.



Meanwhile, the current claims management regulator, Kevin Rousell, said he had issued a formal suspension notice to 52 claims-handling businesses last week after they failed to respond to its authorisation review. He said that while many of these businesses may have ceased trading, those that were trying to evade regulation would have 'no place to hide'.