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‘No transitional period’ says SRA on referral fee ban

Industry News : 26 March 2013

Personal injury firms were today warned by the Solicitors Regulation Authority that there will be ‘no transitional period’ when the referral fee ban comes into force next week.

The regulator has also published guidance and support for firms who will be trying to adapt their business models in order to get work without paying for referrals.

Case studies on compliant business models will be made available as and when they are reported, stated the authority, which went on to reinforce that it will be a firms’ personal responsibility to ensure that they are compliant with the new rules.

SRA Director of Policy, Agnieszka Scott, said; ‘There are so many possible variations of how referrals could work and an infinite number of business models; some will be compliant, some will not. It will therefore be for individual firms to review their current business models and identify whether they are compliant with the ban. Firms need to remember that the ban comes into immediate effect on 1 April. There is no transitional period’

Scott stated that those firms with concerns about their ability to comply with the ban or with the impact the ban will have should contact the SRA to identify risks, thus enabling them to be managed at an early stage.

The ban is being enforced through two new mandatory outcomes which will be found in chapters six and nine of the Handbook. These state that ‘you are not paid a prohibited referral fee’ and that ‘you do not pay a prohibited referral fee’.

In addition, the code of conduct will seek to define referral fees, while indicative behaviours illustrate how the outcomes can be achieved, avoiding the need to include detailed prescriptive rules.

However, speculation is already building that firms who currently rely on work from referral fees are preparing their own models to get around the ban.

Mark Friston, Deputy Costs Judge,  tweeted last week that he had seen five ‘workarounds’ that were ‘enough to satisfy me that it can properly be argued that payment is not for a referral’.

However, Kerry Underwood, founder of Hertfordshire firm Underwoods said that firms had yet to realise ‘the game is up’ with regard to referral fees. ‘Staggered at firms who think referral fee ban is something to be got round. They are banned,’ he tweeted.