Having attended the Westminster Policy Forum Keynote Seminar on The Legal Services Market- Regulation, Innovation and the Future of the Legal Services Act, I think I can honestly say that at last some progress on debates that have rumbled on for years, has been made.
Regulation and the Legal Services Act
We have the Competition and Markets Authority to thank back in 2001, from their former remit under The Office of Fair Trading, for producing a report which led to the Clementi Review and finally The Legal Services Act 2007.
Why do we thank them? Well, in the main there have been many positives that have come out of the LSA 2007, not least the discussions and reports over the last nine years that have led us to a more diverse legal profession with more focus on the consumer both in terms of choice and protection.
The Legal Services Act was fit for purpose in 2007, but the provision of legal services has moved on to become ever more consumer driven, that requires innovation at the heart of its thinking. A new Act of Parliament is therefore needed to cope with the latest trends in legal service provision.
The illogical reserved activities under the LSA 2007 have been a barrier to a progressive legal services market, preventing professional, competent and often more cost effective unregulated providers to compete in the market place. Of course I am talking about PPR Paralegals who now have the ability to be subject to voluntary regulation under the PPR and have Paralegal Practising Certificates. Why should our professionals be prevented from conducting litigation when they are competent to do so? Does this help to combat the crisis that we have in the civil courts where litigants in person are an ever increasing occurrence with no legal representation in sight?
The Legal Services Board has published its ‘Vision on Reform’ and a key component of that is to replace the current eight regulatory objectives with just one:
‘Safeguard the public interest by protecting consumers and ensuring the delivery of outcomes in the interests of society as a whole.’
At a first glance it is difficult to argue against its sentiment but a closer look raises the question as to who decides what is in the public’s interest? Isn’t cost effective legal services paramount to addressing the unmet legal need, even if it is unregulated?
The regulatory landscape is cumbersome, the LSA 2007 itself is 400 pages long. Regulation is now being championed by the SRA on a risk-based approach and recent indications suggest that in order to cut the cost of regulation, the corporate sector may well be left to a certain degree, to regulate itself.
The LSB appears to be seeking complete regulatory independence of regulators from any representative or commercial interests. This is to be applauded and if it is ever achieved then it is quite possible that the role of the LSB will no longer be required.
The SRA has circa 1,000 new ABS’s likely to be licensed this year. This is good news to help open up the market and to welcome innovation into the sector.
So what can the LSB and its regulators do to ensure that the legal services market truly offers the consumer what it needs?
Firstly, it needs to embrace the opening up of the market to include ‘unregulated’ providers such as Professional Paralegals. Secondly, in order to enable growth in the sector, the burden of regulation needs to be lifted where it is not needed, and finally they should address the need for education of consumers, to enable them to make informed choices.
Kathryn Stone, Chief Legal Ombudsman recently made an extremely valid point that redress for consumers needs to develop alongside the regulatory framework.
Consumers need to know prior to engaging a provider of legal services, what right for redress they have and to whom, should things go wrong.
This is where the PPR has bridged the gap- consumer clients of our members have redress through the PPR where otherwise they have no redress not even from the Legal Ombudsman.
More recently, the CMA published its interim findings on the supply of legal services and I agree with their conclusion that the lack of transparency on price and service is undermining competition, reducing the incentives for providers to compete on price, quality and innovation.
So, what are we getting wrong?
The rise of comparison websites has made it easier for consumers to compare legal service providers in terms of recommendation, but it would appear that legal service providers are still not being clear and transparent with consumers in terms of costs and the services that they will receive.
Latest findings show that 46% of legal services to the consumer are concluded on a fixed fee basis. This clearly indicates a preference by consumers to know how much the service will cost them up front. Of course not all services are easy to bundle or unbundle to provide a fixed fee cost but areas that are procedure driven such as conveyancing are finding fixed fees a popular choice by their clients.
Two thirds of consumers recently surveyed think that legal services are too expensive. Small businesses, that make up 99% of British businesses think that legal services are unaffordable and turn to their accountants, HR departments or google for advice, even though 86% of them agree that legal services are essential to their business.
Of course there is the school of thought that suggests that stimulating competition by price alone effects professional standards. But why should that be?
The costs for legal services is not and never has been an indication of professionalism.
Solicitors cannot offer unregulated legal services outside of a regulated entity, but if they could, does that mean it would affect their professional standards?
It would appear that legal service providers need to provide clearer signals in terms of services offered, the quality of those services, and the costs that they charge at the point of need.
With 1:4 consumers now actively shopping around for legal services, 1:4 using on-line services and 1:5 using unbundled services, legal service providers need to address the needs of individual consumers, corporate consumers and SME consumers and not offer a one-size fits all package.
PPR Voluntary Regulation
We already put the consumer at the heart of our regulatory scheme. We have a complaints procedure and a compensation fund available for clients of PPR Professional Paralegals who have a Paralegal Practising Certificate.
We will over the coming year be looking at transparency in terms of services offered and costs. It is not for us to tell you the type of business model you should have or the type of fee structure, but it is our role to inform you of current trends in the way that consumers want to access and pay for their legal services.
Fixed fees appear to be the preferred option for consumers however where this is not possible, then it is clear that consumers need to know the full extent of the actual and likely costs at the point of need.
The future for PPR Paralegals is bright, the opportunities for you to grow your businesses have never been so good. If you are not a member of the PPR and do not have a Paralegal Practising Certificate then in terms of redress for consumers, you will quite simply be unable to compete.
Rita Leat, Managing Director, PPR