Referral fees - does the consumer benefit?

Very interesting to see the Government now pick up the issue of referral fees being paid by lawyers for information about possible personal injury claims or for such claims to be referred. Despite the majority of the legal profession being against the concept of referral fees they are permitted. The kind of issues mentioned today (false claims being made, deliberate accidents being caused and unwanted texts being received encouraging a claim) are symptomatic of referral fees. That is not to say they are the only cause - false claims have always been made and will always continue to be made.

Does the consumer benefit from a third party being paid for their claim to be passed to a solicitor? An argument in favour is that the third party has the ability to advertise people’s rights and make them alive to the fact that they might have a claim. Law firms don’t generally have the financial ability for that level of advertising. Against is that an intermediary is making a profit (which ultimately must increase the cost to the consumer or negligent party) , that matters are not always referred to the right specialist (referral agencies only refer to firms on their panel who have agreed to pay a referral fee) and firms who pay referral fees often engage junior staff to process claims as the only means of making it pay.

Good quality service comes at a price – mostly it is worth paying the extra. Keep an eye out for our articles over the next few months about referral fees paid by some law firms to estate agents for conveyancing referrals. Have you ever been told by an estate agent that you must use a certain law firm? Have you ever wondered why? Is it compulsory? Our first article on the topic will be on our website next month.

Bettina Brueggemann, Managing Partner, Hart Brown