Regulator rejects referral fee ban

The government’s legal services watchdog has stopped short of recommending an outright ban on referral fees.

The Legal Services Board backs a recent report by its Consumer Panel rejecting the Jackson review’s call for the scrapping of referral fees.

But the regulator has outlined a detailed set of clear disclosure and transparency requirements for those who enter into referral fees arrangements, which are paid by lawyers to organisations that ‘sell’ damages claims.

The board says its proposals are designed both to give consumers better awareness of the details behind transactions and to secure greater transparency across the sector.

The proposals are subject to a 12 week consultation with responses informing a final decision paper to be released in the second quarter of 2011.

LSB chairman David Edmonds said: “There has been long-running debate around these issues. But empirical evidence has been lacking. The proposals we are making today are underpinned both by economic analysis across the market, and by investigation of consumer attitudes.

“As a regulator we are committed to proportionate intervention. Our hypothesis is that neither an outright ban nor a laissez-faire free-for-all would be appropriate. Instead, we suggest that clear obligations on transparency would preserve the beneficial impacts of the arrangements, whilst addressing the conditions that underpin concerns about consumer choice and transparency. Final decisions will rest on responses to this consultation.”