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    Doubling disclosure could clean up ‘murky’ referral fees

    Boosting transparency of referral fee arrangements could bring a welcome change of attitude in the market, according to a leading legal services professor.

    The comments came as the Legal Services Board announced it would double disclosure requirements rather than opting for an outright ban or an open ‘free for all’ market.

    Under the terms of the board’s latest consultation shortcomings in the current system would be remedied by introducing a dual transparency requirement.

    “Transparency has the potential to open up this murky area to far greater scrutiny by regulators and others,” said legal services professor Richard Moorhead, of Cardiff University.

    Lawyers will have to tell clients about the amount of the fee, who it is paid to and for what service. They will also have to tell clients they have a right to shop around for an alternative service provider instead.

    In addition, all agreements between introducers and lawyers will have to be in writing. All approved regulators will be responsible for collating and publishing these agreements.

    “As a regulator we are committed to proportionate intervention,” said LSB chairman David Edmonds (pictured). “Our hypothesis is that neither an outright ban nor a laissez-faire free for all would be appropriate.

    “Clear obligations on transparency would preserve the beneficial impacts of the arrangements, while addressing the conditions that underpin concerns about consumer choice and transparency.”

    Solicitors have been allowed to enter into referral fee agreements since 2004 when a previous sector-wide ban was lifted.

    Since then referral fees have been the subject of controversy, with many saying they undermined lawyers’ independence.

    “Disclosure is a crucial part of ensuring that consumers know the details of the deal they are getting. Yet there is evidence that in many cases these rules are not complied with,” the consultation said.

    Solicitors Journal Online 07.10.2010