City lawyers have joined the Law Society in calling on the Solicitors Regulation Authority to reconsider plans to withdraw from regulating consumer credit work.
Small law firms in particular may unwittingly become exposed to criminal liability and bring the profession into disrepute, they claim.
The warning comes in the City of London Law Society’s response to an SRA consultation on the issue that closed this week. The regulator has signalled its preference to pass regulatory responsibility to the Financial Conduct Authority from 1 April next year.
The CLS response has been written by Sarah de Gay of Slaughter and May, chair of the society’s professional rules and regulation committee.
Firms which continue carrying out consumer credit work will have to become dual-authorised, generating additional costs that will be passed on to clients, the society says. It would be ‘far more cost-effective’ for the SRA to continue.
The society suggests that the SRA could follow the example of the chartered accountancy bodies, which are working with the FCA to enable accountants to conduct consumer credit activities as an incidental service subject to compliance with a condensed version of the FCA’s rulebook.
If the SRA does press ahead with the switch, the society says there should be a longer timeframe to enable an ‘orderly transition’ for law firms.
In a separate development, Harrington Brooks has become the first debt-management firm to agree a redress package for customers since the FCA took over responsibility for regulating consumer credit work by non-lawyers on 1 April this year. It has agreed to pay £185,000 to over 4,500 customers after communications from the firm to creditors on customers’ behalf were delayed.
Linda Woodall, director of mortgages and consumer lending at the FCA, said: ‘Debt management customers are struggling financially and often in difficult situations so it’s important that when people are putting their trust in a firm, they get the service they have paid for.’