Unregulated providers of legal services are often cheaper, more innovative and more transparent with their prices than their regulated competitors, while offering a good level of client service, a report by the Legal Services Board has found.
LSB chair Sir Michael Pitt (pictured) said the research showed that the unregulated sector is ‘neither as big nor as problematic as some have suggested’.
But while the research claimed that unregulated providers offer multiple benefits, it noted that there was a lack of awareness among consumers about the regulatory status of providers and the differences in the levels of consumer protection.
The report also found that there was evidence that some providers were not always transparent enough for clients to fully understand the services they are buying, with some providers making misleading advertising claims.
The research, which focused on unregulated providers for wills, divorce and intellectual property law, found that on average unregulated providers represent 5% of the paid advice given to address a legal problem.
The proportion was highest in family law, where unregulated providers represent between 10%-13% of the paid advice given.
The research found that unregulated providers offer lower prices on average than their regulated competitors, particularly for wills and divorce.
According to the report, solicitors on average charge £722 for an uncontested divorce compared to £36 to £172 from online divorce providers.
It noted that online providers do not provide general advice. Lower staff costs, lower compliance costs and greater efficiency thanks to automation were the main reasons unregulated providers were able to undercut solicitors and barristers.
The research also found that unregulated providers give more price transparency than regulated providers, often displaying prices on their websites and charging flat fixed fees.
Unregulated providers are also more likely to use technological developments to provide services, the report said, particularly for divorce and intellectual property where services can be obtained entirely online.
Meanwhile it noted that consumers value the fact that wills and estate administration providers typically conduct home visits.
The report also found that 81% of consumers who had used an unregulated provider were satisfied with the customer service, almost the same level as with regulated providers, where 84% of consumers said they were satisfied.
It noted that unregulated providers are ‘markedly more likely to have introduced a new or improved services in the previous three years’ compared with a solicitors' firm or barristers' chambers.
Overall the report said unregulated providers bring greater access, choice and fairness in the supply of legal services.
Pitt said: ‘We hear too much anecdote about the unregulated parts of the legal sector and alleged problems associated with such providers. This new research suggests that the unregulated sector is neither as big nor as problematic as some have suggested.’
He added: ‘It is however, very important that consumers make informed decisions to use unregulated providers. They will receive less protection than if using a regulated provider and it is of concern if they are accepting this without realising the lack of consumer protection.’
Legal professional bodies said that the LSB report understated the risks posed by unregulated providers. Chantal-Aimee Doerries QC, chairman of the Bar Council, said: 'It is a matter of concern that between 23,000 and 30,000 people, according to the LSB report, are using unregulated online providers when going through a divorce.
'Using unqualified and insufficiently insured providers of advice in family matters, which will often involve children, instead of using the services of properly regulated professional lawyers, carries considerable risk for all concerned. Legal regulators must do more to warn consumers about the risks of using the wrong type of legal service provider – unregulated, not properly qualified or insured.'
Law Society chief executive Catherine Dixon said: 'Many legal services can be provided by regulated and unregulated providers. If legal services are purchased from a solicitor, buyers can rest assured that the service is fully regulated, that insurance is in place and that in the event that something goes wrong they have the right to redress.
'Unfortunately however, it is not always clear to consumers whether they are buying from a regulated provider. As the LSB research shows there are a number of unregulated providers supplying the same legal services as solicitors and many buyers simply will not know that they won't get the same level of protection from an unregulated provider if something goes wrong.
'This can be exacerbated if the unregulated provider calls themselves a lawyer which is not a protected title. We think that you should only be able to call yourself a lawyer if you are a qualified legal practitioner. We are concerned that many consumers may not know the difference, which can leave them exposed.
'We think that if it is the case that consumers need regulatory protection such protection should be consistent across the market. If not this can lead to unfair competition and a lack of regulatory protection for some buyers who genuinely believe they will have rights of redress and are insured in case something goes wrong.
'Solicitors' expertise comes from rigorous training, they work to professional standards, are regulated, have insurance and their clients have access to redress if services do not meet the required high standard.
'There are obvious benefits in improved, consistent price and service transparency in advertising across all suppliers of legal services, whether regulated or unregulated. Solicitors are also bound by a code of conduct which ensures they are transparent about pricing with a client before beginning work.
'Sometimes, fixed pricing for less complex issues may be the best pricing solution. For many of the more complex services that solicitors provide, such as family services, clients have more complex needs and so the price of the service they receive will be determined by their individual circumstances and the type of advice they require.
'The profession has a great track record of innovation and creativity in a changing market. Solicitors embrace new technology to meet the needs of clients, reduce costs and maintain their competitive edge. This ability to adapt ensures the vibrancy and long term success of the legal sector in the UK.'