The Solicitors Regulation Authority’s plans to reform its client financial protection arrangements have been called into question by a trade association for mortgage lenders.
Responding to a discussion paper, the Council of Mortgage Lenders said it did not believe there was any ‘compelling’ evidence for the changes proposed.
‘We are not aware of any general push for radical changes by either the profession or their insurers. Certainly our members do not support any change,’ it said.
The CML’s 131 members hold around 96% of the assets of the UK mortgage market.
The SRA is considering a number of options for reforming its professional indemnity insurance arrangements and Compensation Fund. The total premium for 2014/15 was around £250m and the Compensation Fund pays out on average more than £20m a year, it said.
Minimum terms and conditions for current insurance arrangements - currently £2m for partnerships, and £3m for limited companies and LLPs - are also being reviewed.
The regulator is planning to publish ‘detailed’ proposals in a further consultation in ‘early 2016’. The earliest any major changes can be implemented is October 2016, it said.
The CML said the SRA’s proposed timing was ‘concerning’.
‘This would only allow a matter of several months for insurers, clients such as lenders, and the profession to adapt,’ the trade association warned.
‘Given the lag from a lender’s instruction to a solicitor, to completion of a transaction, is typically three-to-six months, lenders will need to consider impacts of the proposals on their pipeline risk and act to protect themselves accordingly.’
The CML recommended major changes, such as changes to the minimum terms and conditions, should not take effect for 18 months.
It welcomed news that the SRA was working with insurers to review claims trends and histories to help inform client protection levels in the future.
‘However we hope that the SRA will not use the information solely to help evidence options to reduce the costs of insurance by reducing the ability of clients to claim,’ it said.
The CML advised the regulator to focus on preventing client loss ‘in the first instance, tackling the root causes of PI claims, before seeking to reduce client protection’.