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Referral Fees

Bit like Marmite these - you either love them or hate them. Some say that permitting companies and organisation to sell cases to the highest bidder has resulted in the devaluation of a profession. Others believe referral fees have allowed markets to be opened up for consumers.

Refferals have been talked about for some time now and finally, the Legal Services Board (LSB) has come to a decision. They have decided not to ban them but have then left everything else to the Solicitors Regulation Authority with a steer to ensure there is transparency  i.e. the SRA needs to create some rules so that clients know how much is being paid, when and by whom to whom (er which already exists in Personal Injury).

Why did the Legal Services Board decide not to ban them? Well, bizarrely Alternative Business Structures seem to have put a kibosh on the ban. The rules for Alternative Business Structures come into force in October this year. They will allow non-solicitor ownership of solicitors firms - which means that external investors can get a piece of the pie.

How can this be related to referral fees? Well, large referrers are pretty powerful. A company that controls the supply of work is very valuable. The LSB  realised that if referral fees were banned, come October, there was a lovely mechanism being put into place which would allow referrers to be rewarded. They would simply be given a slice of a law firm - and they didn't want that. A ban would encourage this and this was a step too far for the legal profession.

Referral fees may be a dirty word to some but they are here to stay and remain the caller of many tunes.

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