Legal Services Consumer Panel cautiously welcomes SRA review of consumer protection in the light of Axiom Ince

The Legal Services Consumer Panel cautiously welcomes SRA review of consumer protection in the light of Axiom Ince.

As legal services consumer panel members, the Legal Services Consumer Panel has been horrified by the picture emerging about the closure of the law firm Axion Ince.

The full scale of the number of consumers affected by the collapse of the firm is not yet known, but in December 2023 the SRA said it expected thousands of claims to its compensation fund. By November 2023 £33m worth of claims had already been lodged by 300 consumers.

Reading comments posted on the Facebook group created by Axion Ince clients brings home the human cost when legal services fail. The Panel will continue to monitor developments.

The Panel is the constant voice speaking up for the needs of consumers of legal services, and they continually identify where consumers are not being considered or properly protected.

Law firms and other regulated legal service providers are generally trusted by consumers, but Axiom Ince illustrates what can go wrong and why regulation is so important.

The Panel therefore welcomes the announcement by the SRA that it is reviewing its overall approach to protecting consumers in response to shifting risks in the sector.

The Panel particularly welcome the first focus on how the SRA can reduce the risk that something goes wrong at a regulated law firm that causes harm to consumers. That is the essence of the role of a regulator, and it is essential that risk management is always being reviewed for its effectiveness.

The Panel notes the second focus of the review on looking at its Compensation Fund arrangements. This safety net can be essential for consumers where there has been dishonesty, or a firm collapses.

The Panel has previously expressed its dissatisfaction with steps to reduce the scope and cover of the Compensation Fund. The Panel was also instrumental in persuading the SRA to continue the Solicitors Indemnity Fund that covers consumers for claims made after a law firm has ceased trading some time before the issue became apparent. In both situations, the Panel felt that the views and needs of consumers hadn’t been properly considered.

The Panel accepts that the SRA will want to review these arrangements as risks change over time, and will prioritise engaging with the review using its unique perspective and insights from its engagement with consumers and their representatives.

The Panel says it can do no better than to quote what it said to the SRA in 2020 when it was last reviewing the Compensation Fund:

“The Compensation Fund arrangement is beneficial to both consumers and solicitors.

“While the benefit to consumers is often highlighted, the added confidence that this safety net affords the profession can’t be underestimated.

“It can never be taken for granted that consumers are being asked to entrust solicitors with money running into hundreds of thousands, sometimes millions of pounds e.g. where solicitors offer conveyancing and probate services.

“The protection for these large sums must be robust.

“This is the cost of doing regulated business and the added assurance that consumers pay for.

“And if the cost of contributing to the Compensation Fund is driven up by solicitors partaking in reckless activities, the SRA needs to focus on tackling these activities.

“Adjustments to how the Compensation Fund operates cannot be to the detriment of those consumers who have been wronged.”

Kindly shared by Legal Services Consumer Panel