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Referral fees ban welcomed by most

'Knee-jerk reaction' will push fees underground, APIL predicts

12 September 2011

The government’s decision to ban referral fees has been welcomed by most solicitors, the insurance industry and consumer lobby, but not by the Association of Personal Injury Lawyers.

The Law Society said it was disappointed that the ban would not extend to conveyancing.

Chief executive Des Hudson said the society had been calling for a ban for two years and was pleased its arguments had finally been listened to.

“However, the society remains concerned that the ban is handled in a careful and considered way as the scope for unintended consequences is very high.

“Many law firms have reluctantly had to base their business models on the payment of referral fees, as the actions of insurers and claims management companies meant they were forced to do so.

“The government will need to ensure that enough time is given for the market to adjust to the ban.”

The society said the defintion of ‘referral fee’ was crucial, so legitimate marketing by law firms did not end up being banned.

Deborah Evans, chief executive of APIL, said most solicitors had reservations about referral fees but it was difficult to see how they can be banned without simply being driven underground.

“This is a knee-jerk reaction from the government serving as a distraction from a badly-conceived bill, which will cut off genuine claimants from their right to full and fair access to justice,” Evans said.

“Instead of trying to ban referral fees, why not introduce real solutions to tackle the real problems in the system? Why not impose an outright ban on the passing on of injured people’s private details without their express consent, on every occasion?”

Evans said APIL had also called for a ban on cold calling. She added that defendant lawyers routinely approached injured people directly, offering to settle claims by the “back door”.

Welcoming the government’s announcement, Tim Oliver, president of FOIL, said referral fees were “symptomatic of an unbalanced civil justice process layered with unnecessary costs”, to the detriment of society as a whole.

Oliver called on the government to press ahead with implementing Lord Justice Jackson’s proposals to further reduce the costs of civil litigation and for an accompanying appropriate reduction in fixed fees and guideline hourly rates.

Des Collins, senior partner of Collins Solicitors, said he could not see why it had taken so long to ban referral fees.

“They don’t do any credit to the profession,” Collins said. “The sooner we can get rid of them, the sooner we can start addressing the real issues with personal injury claims and culture.

“There are lots of other ways to put people with genuine claims in touch with people who can help resolve them. To an extent referral fees perform that function but they bring a lot of dross into the equation.

“There are better ways claimants can be directed to proper sources without a middleman taking a cut.”

Justice minister Jonathan Djanogly said the government’s intention was to ban referral fees through an amendment to the legal aid bill, if he could win over business managers in the Commons.

As Solicitors Journal went to press, the MoJ could not confirm whether the amendment would be ready in time for today’s meeting of the bill committee.

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