Monthly Archives: March 2015

SRA welcomes Treasury changes to consumer credit

Following close working between the Solicitors Regulation Authority (SRA), HM Treasury and the Financial Conduct Authority (FCA), HM Treasury has agreed to changes in consumer credit regulation which will further help to reduce regulatory burdens on firms.

Certain consumer credit activities, such as debt collecting, will now be excluded from regulation under the Financial Services and Markets Act 2000 where those activities are undertaken by solicitors – or others authorised under the Legal Services Act 2007 – in the course of providing advocacy services or litigation services. The definitions of these services would include pre-issue work. These changes will be particularly beneficial to firms, without any detrimental effect in terms of consumer protection.

HM Treasury was also asked to increase the number of repayments before an agreement with a client is a regulated credit agreement. From 18 March 2015, the number of repayments that fall within the exemption in article 60F of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO), has increased from four to twelve.

The FCA agreed a further extension to the transitional arrangements for consumer credit regulation, with the current transitional period ending on 31 October 2015. The SRA is currently in discussions with the FCA about the way in which these activities will be regulated after that date.

Crispin Passmore, SRA Executive Director for Policy, said: “We welcome these changes which will further help to reduce regulatory burdens on firms providing consumer credit services. We continue to work with the FCA on an effective way forward in regulating law firms for consumer credit in a way that protects the public, at the same time taking into account the way solicitors work and the SRA’s regulatory approach. We will keep the profession updated on progress.”

Further information on the changes made by HM Treasury and the current position on consumer credit work can be found on the SRA website here:

Go to the consumer credit page

Ombudsman complaint limit rises from six to 12 months

The Legal Ombudsman has announced it will double the length of time clients have to bring a complaint against legal services providers.

From July, the time complainants have will increase from six months from the date of a final response from a lawyer to 12 months.

The change is not subject to any consultation because it is prompted by the European Union alternative dispute resolution directive which comes into force this summer.

In a notice published on its website, the ombudsman said its scheme rules have to be brought into line with the directive’s provisions. The announcement has been made now to give practitioners time to change their complaint practices accordingly.

All final response letters which are sent by legal services providers which are sent on, or after 9 July, must include the 12-month limit.

The notice adds: ‘We suggest that from 9 July 2015 legal services providers ensure that this change is reflected in their client care letters, terms and conditions, and complaints procedures.’

The ombudsman said it is still trying to determine if any further substantive changes to its scheme rules are needed to bring the service into line with the directive. A full review of scheme rules is planned for later this year irrespective.

In 2013/14 the LeO resolved a total of 8,055 cases – up from 7,630 the previous year. It received 69,500 contacts by phone, letter or email compared with around 71,000 in 2012/13.

The EU directive came into force in July 2013 and the UK has until this July to transpose its requirements into national law.

The directive is designed to ensure consumers have access to consistent levels of redress across all EU member states.

(Law Gazette, 23rd March 2015)

SRA Risk Outlook Spring Update published

Publication of the Spring Update to the Risk Outlook has been announced by Paul Philip, Chief Executive of the Solicitors Regulation Authority (SRA) today.

Mr Philip revealed the publication of the update to the 2014 Outlook at the Law Society’s Risk and Compliance Annual Conference in London. Alongside the update, the SRA published a report on balancing duties in litigation. Key headlines from the update include:

  • record number of reports of bogus firms in 2014
  • 69 percent of UK companies hit by cybercrime
  • scrutiny over firm accounts used for client banking
  • lack of a diverse and representative profession
  • standard of service to consumers.

The accompanying paper, Walking the line: balancing of duties in litigation, considers integrity and ethics when balancing duties to clients, the court, third parties and the wider public interest.

Paul Philip said: “Alongside our yearly Risk Outlook, we want to provide regular information to help firms manage risk. This includes updates on the latest trends, and on relevant topics like balancing duties in litigation.

“Our new ‘Walking the Line’ report looks at the risks around prioritising client interests over other duties and discusses issues such as aggressive, predatory or speculative litigation, abuse of litigation process, misleading the court and taking unfair advantage of a third party.

“Firms and solicitors will want to read these short reports and think about how they could use them to inform their own risk management.”

The Risk Outlook, published in July each year, is produced by reviewing the current legal services market to understand better the drivers of risk to the regulatory objectives. The SRA updates the Outlook twice a year and the autumn update was released in November.

The Outlook provides firms and the public with a clear view of the SRA’s assessment of significant trends in the legal services market. It also profiles key risks and explains what is meant by each of them, why they are significant and the regulatory approaches to managing them.

The Risk Outlook Spring Update, and other Risk publications, can be found here:

Go to the Risk pages

Beware telephone scams, SRA warns

Don’t be duped into disclosing bank security information, the SRA is warning following reports of more firms being targeted by telephone con artists.

The reports involve at least two incidents this month where telephone fraudsters posed as bank representatives. This follows on from four firms being targeted in November last year which prompted another SRA warning.

The callers use refined techniques to gain the confidence of those they call – known as social engineering – and obtain information enabling them to access accounts. They ask for “challenge and response” codes, which are then used to authenticate payments and in some cases digital banking log on and password credentials.

Robert Loughlin, Executive Director of Operations & Quality, said: “We are very concerned about this increase in activity. The con artists are highly sophisticated in their approach and their script makes them sound as though they are genuinely who they say they are, even though what they are doing is trying to obtain confidential information.

“It’s not just ourselves at the SRA who are concerned about this increase in activity. Time and again solicitors across England and Wales are raising it as a serious issue during our discussions with them.”

Banks will never ask for passwords or account related details over the phone. If employees are concerned about the authenticity of a caller, they should terminate the call and make further enquiries.

To validate callers, firms should contact somebody they already know at the bank, using a separate telephone line, eg a mobile line. There have been examples of the scammers keeping telephone lines open, to intercept an outgoing call.

Competence statement could be used as enforcement tool, SRA chief says

The Solicitors Regulation Authority adopted a new way to judge lawyers’ competence yesterday, which will for the first time mean it does not need to rely entirely on expert opinion or case law.

Speaking after the SRA board approved the final version of the ‘competence statement’, chief executive Paul Philip said it could be used in enforcement proceedings against solicitors.

“Conceptually, the statement is actionable from a regulatory perspective,” Mr Philip told a press briefing.

“We are not talking about a one-off piece of bad advice, but consistently delivering poor-quality advice, which could be actionable – for example if it’s an asylum advice case and someone is deported.”

Mr Philip said the new competence statement would be published in the first week of April. This would allow it to be used by law firms and organisations wanting to adopt the SRA’s new competence-based CPD regime from next month, instead of the hours-based system.

The chief executive added that the SRA’s 125 in-house solicitors would all be moving to the new system.

SRA chair Enid Rowlands said competence-based training had been around for ages and was seen as “standard practice” across a whole range of sectors. “The concept is ideal for the solicitor’s profession – it’s so diverse.”

The SRA board was told that 72 responses had been received to its consultation on the competence statement, showing “broad support” for the change.

However, referring to responses from the Association of Law Teachers, the University of Law, the Law Society and City of London Law Society, the regulator said some respondents were concerned to ensure that “qualification as a solicitor was tied explicitly to graduateness”.

Crispin Passmore, executive director at the SRA, said: “We must not confuse the level of competence with the way you demonstrate it. Having a degree is not the only way to demonstrate competence. There are different ways to get to graduate level. Foreign lawyers doing the transfer test are not required to have a degree.”

Mr Passmore said solicitors could also have come through the chartered legal executive route, and the apprenticeship route would soon provide another alternative.

Mr Philip added: “We agree with the University of Law that we’re here to uphold high standards. Can you be a good lawyer without having a degree and an LPC? Yes, you can.”

Earlier board member David Willis, ex-joint chief executive of Herbert Smith Freehills, warned that “there are clearly still people in the regulated community who would like to portray what we do as lowering standards”.

Mr Willis said the regulator would have to make sure it was getting its message across.

“There are some vested interests who will attack what we’re trying to do. We will have to win the communications battle.”

(Legal Futures, 12th March 2015)

SRA to withdraw from the Voluntary Code to good practice in the recruitment of trainee solicitors

The Solicitors Regulation Authority (SRA) has today confirmed that it will withdraw from the Voluntary Code to good practice in the recruitment of trainee solicitors from the end of March 2015.

The SRA is withdrawing from the code as it is not its regulatory role to be involved in deciding the dates and processes by which individual employers and employees make recruitment choices. The decision to withdraw was taken after careful review and discussion with other signatories to the code.

Crispin Passmore, SRA Executive Director for Policy, said: “We had planned to let people formally know of our withdrawal from the Voluntary Code later in the year in order to give proper time for notification to the sector. As detail is now in the public domain, we have reviewed our original position.

“We believe that a prolonged period of notification of withdrawal would serve nobody’s interests. In order to remove any uncertainty about the code, or confusion about our role as a signatory, we have simply brought the date of our withdrawal forward.

“It is beyond our regulatory remit to uphold the code, as it is essentially a commitment to good recruitment practice. Our withdrawal does not reflect any view of the code’s benefits for firms or potential trainees.”

Even with SRA involvement, the code has always been voluntary, and universities and employers may continue to comply with the code in future if they wish.

Other signatories to the Voluntary Code to good practice in the recruitment of trainee solicitors are The Association of Graduate Careers Advisory Services (AGCAS); the Association of Graduate Recruiters (AGR) and the Junior Lawyers Division (JLD).

Law Society updates Practice Note on Conflicts of Interest

The Law Society has made a number of amendments, updated and clarifications to its previous guidance from 25th August 2011. The practice note covers

  • What is own interest conflict and client conflict?
  • How do I assess if there is a conflict of interests?
  • Exceptions when you may act when there is a client conflict
  • Acting for a buyer and seller
  • Acting for clients who are the lender and borrower
  • Relations with third parties in a conveyancing transaction

To read the revised guidance, click here.