Monthly Archives: June 2015

New consumer credit proposals

New proposals for the regulation of solicitors doing consumer credit work have been drawn up by the Solicitors Regulation Authority (SRA).

The proposals would enable solicitors to carry out certain consumer credit activities as long as they are central to the legal services they provide. They would also ensure that law firms are not over-burdened with additional rules, and that client protections remain in place.

The SRA has been working with the Financial Conduct Authority (FCA) over the last 12 months to identify the best way to approach its regulation of solicitors providing these services. This follows the transfer of the responsibility for regulating consumer credit work from the Office of Fair Trading to the FCA on 1 April 2014.

Crispin Passmore, SRA Executive Director for Policy, said: “Our discussions with the FCA have produced a set of proposals that will ensure regulation is balanced. The proposals would focus regulation on the substantive activities undertaken by solicitors, in a way that would not be overly burdensome.”

The SRA is consulting on its new proposals until 6 August and is keen to have feedback from across the sector. Following the consultation, final recommendations on the regulatory approach are expected to be presented to the SRA Board at its meeting in September.

SRA-authorised firms that mainly carry out consumer credit activities already require FCA regulation. The changes mean firms may now also require authorisation by the FCA if they undertake prohibited activities that are not considered central to their legal services practice.

These activities are listed in the SRA consultation document. The consultation is available on the SRA’s website here:

Go to the consultation page

The SRA will also produce specific guidance around consumer credit work, and will hold a webinar to give those affected the opportunity to hear current thinking and pose questions directly to the SRA. Further information on the webinar is here:

Go to the webinar page

Changes to client care documentation – Ombudsman complaint limit rises from six to twelve months

The  EU directive on alternative dispute resolution (ADR) comes into force in the UK on 9th July 2015. The Legal Ombudsman has applied to become a certified entity under the directive. It can be expected that this application will be successful.

This means that the Ombudsman scheme rules have to be brought in line with the directive’s provisions, and firms will therefore need to update their client care letters, terms and conditions, website and complaints procedure from 9th July.

The length of time clients have to bring a complaint to the Legal Ombudsman against legal services providers will increase from six months to twelve months from the date of a final response from a lawyer. All final response letters sent to clients on or after 9th July must include the twelve months limit.

Terms and conditions  will need to reflect this change and also must show the website address of the Legal Ombudsman (www.legalombudsman.org.uk).

Firms will have to ensure their website also shows the name and website address of the Legal Ombudsman.

Complaints handling procedures should also be amended to reflect the changes.

Further, whenever a firm has received a complaint from a client and has exhausted its internal complaints handling procedure, the firm will now be required to inform the client:

  • that they are unable to settle the complaint with the client,
  • of the name and website address of an ADR certified entity which would be competent to deal with the complaint (i.e the Legal Ombudsman) should the client wish to use alternative dispute resolution, and
  • that they are obliged to submit to the ADR procedure operated by the Legal Ombudsman

Click here to see the guidance provided by the Legal Ombudsman.

Click here to see the regulations issued by the government on the introduction of the ADR.

Rule changes permit law firms to own separate businesses offering non-reserved legal services

The Solicitors Regulation Authority is removing restrictions on solicitors having links with outside businesses.

Changes to the Separate Business Rule—which mean that solicitors can own or be connected to separate businesses providing non–reserved legal services—were agreed by the SRA Board at its meeting yesterday (Wednesday, 3 June). The original purpose of the Separate Business Rule was to prevent solicitors having links to separate businesses outside the remit of regulation.

The opening up of the legal market already allows other types of businesses to own law firms and deliver innovative services. By changing the Separate Business Rule, all law firms can own separate businesses, allowing them to compete on a level playing field with alternative business structures (ABSs). As part of the same package of reforms, the rules on what activities can be undertaken within solicitors firms have been relaxed, making it easier for those firms to create one-stop shops for professional services.

A wide-ranging consultation on these proposals took place from November until February. The SRA Board debated the analysis of comments from stakeholders at its meeting and agreed to the changes.

Paul Philip, SRA Chief Executive, said: “We are levelling the playing field for all types of law firms, encouraging innovation and growth, while ensuring appropriate consumer protection. This follows on from changes we made last year to open up the market to different business models and ‘one-stop shop’ services.

“We are now looking into what more we should do to give solicitors even more flexibility in future.”

The changes need the approval of the Legal Services Board. If agreed, they will be part of Version 15 of the Handbook when it goes live on 1 November.

Further information on the changes to the Separate Business Rule can be found here:

Go to the Separate Business Rule consultation page

Cybercrime issue is escalating, says SRA

Cybercrime issues affecting solicitor firms are increasing the Solicitors Regulation Authority (SRA) has revealed.

More and more reports are being received of firms either being contacted by con artists or falling victim to fraudulent activity, with potentially serious consequences for clients buying or selling property. The SRA is urging solicitors to step up their efforts to keep criminals out and protect client interests.

The majority of recent scams fall into two categories:

  • Firms receiving calls pretending to be banks to obtain sensitive information, such as account passwords
  • Emails between firms and clients being intercepted, leading to client funds being paid into fraudsters’ accounts

This is against a backdrop of continued instances of con artists pretending to be solicitors, using either fake names or stealing the identities of genuine firms. Alerts about such scams are posted here:

Go to the scam alerts

Paul Philip, SRA Chief Executive, said: ” Law firm client accounts are being targeted and solicitors and their clients are suffering disruption and potential loss. It is essential that firms understand the risks and take precautions to avoid falling victim to these attacks.

“This is an issue that is not going away. This is obvious not just from the reports we are receiving direct from law firms and members of the public, but also in our discussions with local law societies.”

The SRA has warned repeatedly against the threat of cybercrime since it was first highlighted in its Risk Outlook spring update in February last year. The risk has not eased, however, and criminals are using increasingly sophisticated methods to obtain money or sensitive information fraudulently.

Firms are advised to check their systems for guarding against cybercrime attacks. Advice on steps to take in the first instance are available from:

Department for Business, Innovation and Skills: https://www.gov.uk/government/publications/cyber-risk-management-a-board-level-responsibility

Action Fraud: http://www.actionfraud.police.uk/small-businesses-know-your-business

Federation of Small Businesses: http://www.fsb.org.uk/policy/assets/fsb_cyber_security_and_fraud_paper_final.pdf