Headline Pricing –a problem for the SRA and the LSB?

Does headline pricing provide an example of how difficult the SRA and LSB will find it to prevent a race to the bottom when it comes to consumer protection?

More evidence that some solicitors like to bamboozle their clients over costs from a piece over at legal futures.  It covers the practice of headline pricing, saying services cost £x when in fact they do or are likely to cost £y.  Two issues appear to arise: one is saying profit costs are (say) £400 plus disbursements.  Clients will routinely think disbursements will not vary between firms and so will choose the firm with lower disbursements.  The problem is that some firms add in work which is profit costs as a disbursement.  When searching for a coneyancer recently a firm quoted me a fee plus disbursements which included filling in a particular form as a disbursement, for instance.

The strategy then is to tell consumers they costs less than the client thinks when in fact they may cost more.  Few will of course notice.

A second problem is how to deal with ‘non-standard’ disbursements. In conveyancing, the cost of searches, in particular, can vary according to the location of the property and (to an extent) the practices of individual solicitors.  Some searches are standard to all or most conveyances and some are rarer.  The extent to which lawyers need to discuss non-standard disbursements when discussing costs and what to include in headline prices is therefore a tricky one.

The story contains some good news for the profession in that the majority of solicitors asked in a survey said they did not  use headline pricing (though saying they don’t and not doing it in fact are not the same thing).  It may also points up a couple of other problems.

The SRA has issued guidance in the area, but this sort of issue presents a potential problem for outcome based regulation.  The aforementioned survey suggests that practitioners don’t want to worry about what the ‘right approach’ is to dealing with the ethical dilemmas of headline pricing themselves (which is the direction in which outcome based regulation pushes them). They want to be told what the rule is and then get on with complying.

The second dilemma is for the Legal Services Board.  One of the reasons why practitioners are not keen to be pushed to far towards ultra-transparent headline fees (or fixed fees) by the SRA, is that their competitors (licensed conveyancers) are not bound by the same rules.  This provides an opportunity for them to gain a competitive advantage by advertising headline fees which look lower than in fact they are likely to be.  Solicitors will look more expensive because the rules dictate transparency.  The LSB is the obvious place one would look to guard for consistency but the Legal Services Act, and the ethos of the reforms, is to allow front line regulators to regulate in their own ways as long as the public interest is protected.  The LSB’s initial approach to regulation is to require persuading that it is needed rather than to need to be persuaded that it is not.  The general lack of evidence on the consumption and supply of legal services builds in a clear bias towards inaction.  Unless the LSB intervenes it is likely to mean inconsistencies between regulators persist and, in the time prior to any intervention, regulators face pressure from their members to race to the bottom, matching the lower standards of other regulated sectors of the market (or unregulated sectors where they exist).  One possible counter current is that consumers wake up to the problem and choose the providers that have the clearest and most fixed costs.  Intermediaries (such as price comparison sites) may have a role here, but my own and other research on clients suggest that they tend to think all providers of legal services charge the same and that, to a point they expect to be taken for something of a ride by the small print.  Professions or individual service providers that can change that culture and make consumers aware of the change may have a lot to gain.

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