Referral fees do not harm clients, says LSB

Referral fees are prevalent in both areas. The LSB is considering the Law Society’s call for referral fees to be banned, and is expected to make a decision in the summer. Lord Justice Jackson also called for a ban on referral fees in his final report into the costs of  civil litigation published earlier this year.

The cost benefit analysis, carried out for the LSB by Charles River Associates, found that while referral fees for conveyancing have increased, conveyancing fees paid by the consumer have not. Neither was quality affected. The report states: “Evidence on the number of complaints is low, customer satisfaction is high and the speed of transaction appears to be faster for those who pay referral fees.”

The report warns that banning referral fees could lead to a return to the situation seen before 2004 where “creative schemes” were used to get around the restrictions.

Referral fees in personal injury have risen from about £250 per case in 2004 to about £800 today, the report found. However, there was no evidence that this had led to an increase in the price of legal services. Most personal injury cases are “no win no fee”, and the majority of motor cases go through prescribed cost and fast track regimes.

Since there was no evidence of detriment, altering referral fees for personal injury work would be unlikely to bring benefits, the report concluded.
Endorsing the report’s conclusions Andrew Twambley, senior partner, Amelans, says: “Jackson LJ regards referral fees as the cornerstone of a huge problem....increased litigation costs. Personally, I do not pay referral fees, but if I did I would be making a commercial marketing decision in respect of my business. Gone are the days when I might sit and wait for local people to pop in with an injury claim. Times have moved on.

“I am a director of injurylawyers4u, the UK’s leading solicitors’ marketing consortium. Since inception we have dealt with over 200,000 calls from injured clients and haven’t had any complaints about members contributing to the marketing cost. As long as the client is made aware of the arrangement, he doesn’t care as it in no way affects him.”