The Legal Services Board has granted an application by the Council for Licensed Conveyancers to alter the rules on the disclosure of fee sharing and referral arrangements in conveyancing transactions.
The rules will require clients to be informed in writing of any fee-sharing agreements with an introducer; referrals will be subject to periodic reviews; clients must be advised that they have a choice of producer, and must be informed of the nature of the arrangements.
The rule change follows a review by the CLC of its arrangements for the regulation of referral fees, following guidance issued to all frontline regulators by the LSB in 2011.
The CLC’s review found there was no justification for a ban on referral fees in conveyancing work, as there was no evidence of detriment to the consumer – a view shared by the LSB and Legal Services Consumer Panel following their own research.
Commenting, CLC chair Anna Bradley said: ‘An outright ban on all referral fees that some have called for could not possibly be justified in relation to conveyancing on the evidence.
‘We proposed, and the LSB has granted, a proportionate regulatory response in the form of additions to the transparency requirements already in place.’
Bradley said the enhanced transparency requirements ‘empower’ the consumer to manage the low level of risk themselves.
During its review, the CLC concluded that the biggest threat to the consumer interest posed by referral arrangements was the level and timing of information given to consumers.
As a result, it opted to make additions to its disclosure of profits and advantages code, to ensure that referral fees are managed by licensed conveyancers in an open and transparent way.
Licensed conveyancers will now have three months to comply with the new arrangements.