The Legal Services Board (LSB) has published new research exploring the for-profit unregulated legal services sector. 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.”
Notes to editors:
- The primary focus of the research was legal services businesses not subject to legal services or other sectoral statutory, mandatory regulation that offer for-profit unregulated legal services such as will-writing, probate support and powers of attorney. We also included businesses providing unregulated legal services as an ancillary element to a primary business such as accountants, architects, insolvency practitioners and surveyors.
- Out of scope were individuals and entities authorised by one of the regulators under the Act and individuals and entities that provide legal services as a significant focus of their activity who are authorised and regulated by a regulator outside of the Act e.g. Immigration Advisers regulated by the Office of the Immigration Services Commissioner. Not-for-profit providers, such as charities, public bodies, membership bodies and trade unions, were also excluded. These bodies represent a distinct and large cohort presenting different sets of issues.
- This research was carried out in house by the LSB’s research team. To explore the size of the market and its characteristics, the team used a framework approach to group unregulated providers into 13 broad areas of law and identify a sample of 550 providers across these areas using keyword searches online. This was supported by ONS and Companies House data and data from past LSB surveys and surveys of professional associations in will-writing, McKenzie Friends and Paralegals. To explore consumer benefits and detriments, the team searched Citizens Advice case notes (relating to the 1.6 million queries between 2019 and 2021); a survey linked from the Legal Ombudsman (LeO); Trustpilot.co.uk review data; and meetings with specialist committees at the Law Society and Bar Council.
- Under section 24 of the Act, the LSB has powers to review and recommend extension of the reserved legal activities to the Lord Chancellor. The reserved legal activities include the exercise of a right of audience; the conduct of litigation; reserved instrument activities; probate activities; notarial activities; the administration of oaths (see section 12(1). The LSB also has powers to enter voluntary arrangements to support the self-regulation of unregulated legal services providers under section 163 of the Act.