Richard Edwards responds to Jack Straw's comments about referral fees in the The Times

Richard Edwards on Referral Fee Consultation

In an early bid for damp squib of the decade the Legal Services Board (LSB) has recently announced its decision following a lengthy consultation on the payment of referral fees by the legal profession.  For those unfamiliar these are payments made by solicitors to bodies who refer work to them, some call them backhanders and until 2004 they were banned.  Since the ban was lifted referral fees have proliferated along with claims management companies (CMC’s) who trade in claims.  All readers will no doubt have been bombarded by texts or stopped in the street by representatives of CMC’s asking if they have been involved in an accident.  A CMC will sell a claim for anything ranging from £500.00 to £1,000.00, sometimes more. 

Despite the Law Society, Bar Council, Lord Justice Jackson, the Transport Select Committee of MP’s and many others urging an outright ban the LSB has suggested only that there be greater transparency so that ‘consumers’ (or clients as I prefer) know when a referral fee is being paid.  The LSB has missed an opportunity to once and for all see off this nefarious practice, and instead passed the buck back to the Solicitors Regulatory Authority. 

I have previously argued that the payment of referral fees has undermined the status of lawyers in general and has helped encourage the rise in fraudulent claims.  As such the trade damages public confidence in the civil justice system which stands as a cornerstone of a civilised society.  Arguments in favour of referral fees include that they can help improve access to justice.  This important function however could be performed by subsidised public education programmes driven perhaps by the Law Society in conjunction with the Association of Personal Injury Lawyers, organisations that can be trusted not to harm the profession in the way that referral fees do. 

Apparently the Law Society intends to write to Justice Secretary Kenneth Clarke asking him to look again at the issue, on recent form, however, one fears the odds of him getting this right are not good.