The Law Society of England and Wales and the Legal Services Consumer Panel (LSCP) have joined together in opposing Solicitors Regulation Authority (SRA) plans to weaken consumer protection by closing the Solicitors Indemnity Fund (SIF) with nothing to replace it
A key long-term protection 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 that some consumers will lose out, but argues that the average successful claim of £34,000 is ‘modest’.
What the SRA has failed to do, it is argued, is to show how ending SIF protection has any benefit to consumers, either in terms of reducing the price of legal services or increasing consumer choice, and its suggestion that 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 that the Fund should not be closed, especially while there are still assets within it, until alternative arrangements are made that would 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. “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 longtail risks.”
Sarah Chambers, chair of the Legal Services Consumer Panel, said:
“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.”
The SRA SIF consultation can be fund at www.sra.org.uk/sra/consultations/consultation-listing/solicitors-indemnity-fund/