Understanding the Personal Injury Claims Referral Fee Ban
Before you thoroughly understand the justification behind the personal injury referral fee ban, you need to know how it is regulated and what kinds of persons are regulated by the Legal Services Act.
Who is regulated? For the specific purpose of the personal injury referral fee ban, searches related to personal injury referral indicate that the regulated person is none other than a claims management company or those persons who have been authorised by the Bar Council or the Law Society to undertake reserved activities under the Legal Services Act of 2007 and those persons who have been authorised by the Financial Markets and Services Act of 2000. The insurance companies fall in this second category. Regulated persons may also include all such persons who have been specified in regulations that have been made by the Lord Chancellor.
What is meant by prescribed legal business?
This business has been defined as one that involves offering of legal services to clients in connection with potential claims for damages for death or personal injuries or any other claim for damages that may arise out of situations that involve personal injury in cases of ancillary claims.
What types of Personal Injury Referral fees?
Car accident claim referral.
Whiplash claims referral fee.
Accident at work claim referral fee.
Medical negligence claims referral fee.
Different types of accident claims referral fee.
Personal Injury Referral Fee Services In The UK
As a result many personal injury referral fee services have now closed many people have lost their jobs and many personal injury solicitors have shut down because they are not able to do their own marketing as good as the claims companies who they was buying personal injury claims from. Referral fees solicitors pain out the referral fee once the claim was sucessful.
Examples of Personal Injury Referral Fees as explained by the LASPO Act
The LASPO Act not only forbids the receipt and payment of personal injury referral fees but also all other claims for the purpose of damages that arise from similar circumstances. For example, when the claim for a personal injury that results from a traffic accident is referred to some solicitors along with a claim for uninsured loss recovery arising out of the same accident, the solicitors would not be in a position to pay the personal injury referral fees in connection with either of the claims. It is impossible to claim that this referral is for related claims instead of for a personal injury claim referral fees.
What are referrals?
Prescribed legal businesses are referred when a person offers information to another person. This pertains to information that legal service providers would have to make an offer to their clients in order to provide all relevant services. The person who provides the information cannot be the client. An example of relevant services could be given when insurance companies have an agreement with a company of solicitors for referral of clients. A claimant contacts an insurance company and informs the insurer of a claim that involves personal injury. The details are provided by that client to the firm of solicitors who, in turn, correspond with the claimant or their client and offer their services. The firm will pay certain fees for every email or price per case that is sent from the website. This would be considered as a personal injury lawyer referral as the insurer has passed information to that firm that allows it to offer to act on behalf of that claimant. In other cases, a website may offer to find an appropriate solicitor firm for members of the public. The concerned client will then be needed to provide input concerning the postcode and the region of law in which they require assistance. They get an email that provides contact details of suitable firms in their locality.
What is considered as a payment?
Payment refers to all forms of consideration regardless of whether a benefit is received by a regulated person or in, some cases, a third party. For example, this may prevent a regulated person from setting up an additional entity to get that referral fee. In other words, this is a type of an arrangement that involves someone else to obtain that payment.
An arrangement for sharing a personal injury solicitors’ referral fee is when a solicitor agrees to give a part payment of the fees in all referred matters when it concerns an introducer would be prohibited by the personal injury referral fee ban. This is allowed when the solicitors are able to prove that the payment price per case is justified depending on the work that is being carried out by the introducers.
It has to be noted that a payment will not include hospitality provision. When a particular payment is towards provision of other relevant services and not for referral, it would not be considered in breach of the LASPO Act. This causes considerable ambiguity and difficulty when a third party starts referring clients to a solicitor firm in addition to offering other relevant services as in the case of marketing activities. For example, a company may carry out advertising for a group of firms. Enquiries will be made to call centres and details of all potential clients will be passed to member firms and every firm shall pay an equal amount of share of the advertising cost connected with the operation of that scheme. The firms that are involved have to be fully satisfied that all payments that are being made to a marketing company are purely for the purpose of promotional activities and not for the purpose of client referral. If payments are made for price per case or lead and when these payments vary according to the number of actual referrals, it is likely to specify that the payment has indeed been made for referrals instead of for marketing services. In such cases, vetting will appear to be on the minimal side and it is tough to prove how the advertising payment could be shown as genuine as it has been paid per each client lead rather than as a reflection of the actual expense of advertising. It can therefore be proved as a breach of LASPO Act and that it would be regarded as an element of personal injury lawyer referral service.
How can the personal injury referral fee ban be circumvented?
The Solicitors Regulating Authority in the United Kingdom has shown ways to businesses who want to circumvent the personal injury referral fee ban by creating alternative business structures. To give an example, all claims management companies can take their own solicitors and merge them with firms of other solicitors. This allows the claims management companies to advertise heavily and then refer cases to lawyers. Such alternate business structures would carry out the work that was previously done by two different companies earlier. This removes the need for payment of personal injury referral fees. Some claims management companies have already started adopting and creating such alternate business structures.
Related links on Personal Injury Referrals.