LSB unregulated services research reveals potential benefits and detriments

LSB research on unregulated legal services reveals potential consumer benefits and detriments. This is the first time the LSB has mapped the sector on this scale, and it suggests the number of unregulated providers comes from a pool of up to 208,000 firms in England and Wales.

The sector is large, complex, and diverse and may account for up to 9% of the total market for individual consumers. The most common areas of law covered include injury, conveyancing, and will-writing, where the market share is likely to be much higher. The sector may account for up to 39% of the total market for small businesses, most commonly covering tax, trading, and employee issues.

Unregulated providers are twice as likely to introduce new or improved services successfully compared to other providers, according to previous research by the LSB. They also appear to be more transparent about the cost of services. In the research, price information was available for two-thirds of unregulated providers, even though, unlike most regulated providers, they are not subject to the Competitions and Markets Authority price transparency requirements.

Unregulated providers are generally cheaper with lower upfront costs, although price models vary depending on the service. Will-writing is typically charged on a fixed price basis. Flight compensation claims are typically charged as a percentage success fee.

While satisfaction levels are high and similar for regulated and unregulated providers, according to Trustpilot.co.uk, those using unregulated providers appear more likely to report dissatisfaction. However, those using unregulated providers do not have access to redress through the Legal Ombudsman. Consumers complaining to Citizens Advice about unregulated providers cited higher than expected costs, unreasonable delays, and poor advice.

The research will inform the LSB’s work on closing gaps in consumer protection and building stronger confidence in regulation. This includes considering whether future changes in the scope of regulation are warranted.

Matthew Hill, Chief Executive of the Legal Services Board, said:

”This research will help increase the sector’s understanding of the unregulated market, and it has insights we can all learn from.

Levels of innovation in the unregulated sector appear to be higher. Consumer benefits include fixed prices and lower upfront costs, which reduces risk. It is also interesting to see the range of cost models in the unregulated sector and the levels of price transparency. This makes it easier for consumers to compare services and exercise choice.

Levels of dissatisfaction are higher among consumers using unregulated services, however, and people do not have access to redress when things go wrong. In our sector-wide strategy, we commit to closing gaps in consumer protection to build stronger confidence in legal services. We must strike the right balance between increasing access to justice and protecting consumers.

We will weigh the findings from the research with a range of other insights and evidence as we consider whether changes to the scope of regulations are warranted in the future.”

Law Society of England and Wales president I. Stephanie Boyce said:

“This research confirms the consumer benefits of using regulated providers. The research found that using unregulated providers can be cheaper, but consumers were more dissatisfied with the service they received, and they don’t have the same access to redress when things go wrong. Consumer satisfaction with regulated providers was much higher, with 90% of consumers satisfied with the service solicitors provide. The research shows it’s in the public interest to address consumer protection gaps the unregulated service provides. We are supportive of this work. The Law Society strongly supports the existing ‘reserved legal activities’ for solicitors as they are in the public interest. Reservation should be considered in a mixture of possible measures for high-risk areas where there is increased evidence of consumer harm, such as will-writing, estate administration, Lasting Powers of Attorney and trusts.

With an increasingly aging population, these areas call for regulatory attention to ensure that vulnerable people – particularly those with mental incapacity – are sufficiently protected. We are still concerned about the public’s confusion about the difference between regulated and unregulated providers. Consumers must be made aware of the limited redress available from unregulated providers compared to the substantial redress available from regulated providers. The priority must be to enlighten consumers about the limitations through public legal education initiatives alongside addressing gaps in client protections. The Law Society is keen on continuing engagement with the UK government, the LSB and other stakeholders to consider possible solutions to better protect clients in the legal market.”

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