In terms of timing, it was unfortunate – to put it mildly – that the Solicitors Regulation Authority signalled a potential fee rise just days after being given the green light to increase compensation fund contributions.
The regulator was keen to stress this week that no decisions have been made – ‘we don’t know’ was a regular response during questions at the media briefing – but the groundwork was being laid for potential bad news down the track.
‘We will need to look to make efficiencies, reprioritise, and if necessary consider using reserves to supplement this year’s available resource,’ said the regulator. ‘This is likely to have implications for future budgets and related fees.’
One driver of this revision is the apparently new and emerging risk from bulk claims litigation. Firms such as SSB Law and McDermott Smith have folded in the past year with thousands of claims that most likely will never result in a settlement. The fallout for clients – some of whom have received legal letters demanding they pay for defence costs – is weighing heavy on the regulator.
Consultation is also due this autumn on the consumer protection review, which will ask key questions of the compensation fund: what is it for, what should it be for, and who should pay for it. The SRA’s demand for solicitors and firms to pay significantly higher contributions in 2024/25 has focused attention on this discussion, and the regulator will reassess the current process whereby firms of all sizes pay a flat fee.
‘We will need to look to make efficiencies, reprioritise, and if necessary consider using reserves to supplement this year’s available resource’
Solicitors Regulation Authority
Given such resource-draining issues, it might be seen as a surprise that the SRA wants to prioritise its approach to identifying and managing risk through better use of data. It is concerned that there is information on thousands of complaints but there are few systems for accessing that data and using it to spot the next problem.
Chair Anna Bradley said: ‘It is about getting on the front foot and trying to ensure the things that would be detrimental to users of legal services are addressed before they crystalise.’
Another issue has become pressing in the light of CILEx Regulation (which ironically faces extinction if the SRA gets its wish to regulate legal executives) making a decisive move on increased transparency, requiring from now on that all firms under its umbrella publish all consumer price information.
The SRA has shied away from such a measure and continues to be cautious about mandating such information in, for example, family law. A paper on consumer engagement said: ‘In an area such as this, where the final costs are difficult to establish before discussing the legal issue, firms may be required to advertise broad ranges of costs upfront, and if the consumer assumes they will be charged the top end of this range they may be less likely to proceed, thus creating an access to justice issue.’
But the Competition and Markets Authority will continue to ask why some legal regulators seem slow to effect change. This may have prompted the SRA’s other significant move this week: a doubling down on transparency rules and a further invitation to comparison websites to enter the legal sector.
In an unprompted update, the regulator said that since May 2023 it has issued 439 official warnings and 36 fixed penalty fines to law firms in relation to transparency rules. These largely result from the SRA’s ongoing checking of firm websites and asking firms to complete compliance declarations. In total, changes have been made to more than 500 previously non-compliant sites. The SRA admitted in the media briefing that it would consider further requirements on firms if necessary.
The SRA launched a new voluntary code for comparison websites, which continues to be seen as a positive innovation for clients. Under the new code, sites must commit to being independent and not be owned, controlled or managed by legal services providers. They must also provide easily accessible, clear information about any commercial relationships they have with law firms and any referral arrangements. Reviews must be ‘reasonably believed to be from clients or prospective clients of the legal services provider and must offer a facility for firms to respond’.
Given such developments (and not forgetting the elephant in the room that is the unpublished Legal Services Board’s review of the SRA’s handling of Axiom Ince), it was probably not an understatement when the regulator said recently that ‘this is not a steady state period’.
Solicitors and firms will surely just want stability from their regulator, but they might soon find a begging bowl being pushed in front of them too.
