SRA must not scrap key consumer protection say solicitors' regulators
In a rare move, the LSCP and the Law Society have joined together to oppose proposals to end the Solicitors Indemnity Fund
The Legal Services Consumer Panel (LSCP) and the Law Society of England and Wales have joined together to oppose plans by the Solicitors Regulation Authority (SRA), they say will weaken consumer protection.
The Solicitors Indemnity Fund (SIF) is a key long-term protection, say the regulators, which ensures consumers of legal services can get compensation for transactions – such as buying a home, wills and child personal injury cases – where a problem may only become apparent years later.
The SRA wants to lose the Solicitors Indemnity Fund (SIF), effectively ending this long-term protection with nothing to replace it. It must not be “ditched” by the SRA unless and until an appropriate alternative arrangement is in place, say the regulators.
The SIF currently provides supplementary run-off cover for firms that have closed, ensuring ongoing long-term protection for clients.The SRA has indicated its preferred option is to close SIF, claiming the cost of running it, compared to the volume and value of claims, is disproportionate to the consumer benefit it delivers.
It accepts some consumers will lose out, but argues the average successful claim of £34,000 is ‘modest’.
The Law Society and the LSCP say the SRA has not shown how ending this protection has any benefit to consumers, either in terms of reducing the price of legal services or increasing consumer choice, and that its suggestion the Law Society, as the representative body of the profession, could provide a similar level of consumer protection through a newly created fund is misleading.
The Law Society supports the continuation of SIF as a long-term consumer protection, backed up by a levy on law firms of £240 per year, which calculations demonstrate would have no material impact on the fees charged to consumers.
The LSCP agrees the Fund should not be closed, especially while there are still assets within it, until alternative arrangements are made to give consumers similar protection.
Law Society president I. Stephanie Boyce said: “It is a sign of how seriously concerned we all are by the SRA’s proposal that the body representing the interests of consumers of legal service is joining forces with the body representing the providers of those services to take on the statutory regulator.
“Our profession is happy to pay for SIF. Any knock-on cost to consumers will have negligible or no impact on the price of legal services – but even if they were, the increases would be tiny, measured in the 10s of pence”.
She added: “People go to solicitors for support and advice during the most important events in their lives – the death or injury of a loved one, family breakdown, a house purchase or estate planning.
“They do so confident in the assumption that solicitors are highly qualified and regulated. On the rare occasions something goes wrong, consumers believe their solicitor is adequately and appropriately insured, and that they will be compensated for any losses”.
“Ending SIF would immediately stop long-term protection for consumers exposed to long-tail risks”, concluded Boyce.
LSCP chair Sarah Chambers agreed: “It is true that the administration costs of this Fund seem remarkably high given the number and level of claims paid out.
“Nevertheless, we remain very concerned that the proposal to close the Fund may be taken forward without proper consideration of the impact on consumers of ‘unknown’ mistakes made many years ago, and of how protection could be maintained through continuing the Fund or replacing it with an alternative which offers a similar level of protection. The SRA should think again.”