The Solicitors Regulation Authority has warned it may not grant licences to alternative business structures set up solely to get round the referral fee ban.
The organisation promised to look carefully at ABS (Alternative Business Solutions which applies to many claims management firms as well as law forms) applicants’ proposed referral arrangements and block business models not truly operating as one entity. In a consultation paper published ahead of next April’s ban, the SRA said there were concerns about law firms and claims management companies coming together under the umbrella of an ABS.
Breaches of the referral fee ban will not be a criminal matter, but will be dealt with by the regulator with action that will be ‘fair, targeted, proportionate and transparent’.
Law firms that do breach the ban can be fined up to £2,000, or £250m for ABSs. Their authorisation or licence may also be revoked in certain circumstances. Individuals or entity can also be referred to the Solicitors Disciplinary Tribunal, which has the power to issue an unlimited fine or strike them from the roll
It will be for practitioners themselves to ensure their own compliance. A regulated person will be in breach of LASPO if they pay for or receive payment for a referral.
As an example, an insurance company that provides details of an accident victim to a law firm for money will be in breach of the ban.
But a website that receives a fixed annual fee from law firms in exchange for potential – and willing – clients’ details is not considered as a referral. A group of firms that each pay to set up a not-for-profit company to gather potential clients’ details would not be in breach of the ban.
But if the advertising was carried out by a commercial entity, and the fees paid by law firms depending on the number of clients referred, that would be unlawful
Banning of referral fees in injury cases - More info
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TC
The whole point of these new regulations is to try and reduce this.Gio wrote:How would this apply to firms that bombard you on your mobile/landline/email about "your" accident or ppi claim.
Insurers cannot provide any database to a claims management firm in return for a fee, and they certainly will not be able to sell on your case details in return for a referral fee (as they currently do), law firms will not be able to get into bed with claims management firms and insurers in the same way as they are now because again they will not be able to pay a referral fee, or if they do, they face potential massive penalties, which will also affect their professional indemnity insurance (we currently pay around £300,000 a year which is cheap), and no law firm can operate without it, and if they get hit, the insurance will increase substantially.
So whilst it will not stop it 100%, the aim of these new regs is to substantially reduce these cold calls, although to be fair, these only apply (as far as I am aware) to personal injury claims, what will happen in respect of PPI, I don't know.
The other thing that needs to be clamped down on is the fact that many of the cold callers ignore numbers that are registered with the telephone preference service.
I had a call this morning about the accident I did not have. As soon as I asked how they got my ex directory number, and in any case why have they ignored the telephone preference list, the voice at the other end (which was English) became very uneasy when I asked then to repeat who they were calling on behalf of, the call was very quickly terminated at the other end.