The CMA to investigate unregulated legal services in the UK

This week the Competition and Markets Authority (CMA) announced its plans to crack down on unregulated legal services following mounting complaints. Indeed, in recent years, there has been a rise in people being ripped off and scammed by will, divorce, and probate firms. In 2021, there were a total of 208,000 unregulated firms handling wills, trusts, and probate matters worth £2 billion; according to the watchdog, this is putting people at risk.

A call to ‘level the playing field’

The CMA’s 2016 review of the regulated legal services resulted in changes within the industry, with progress on transparency and movement toward regulatory reform, but less attention has been paid to the unregulated sector. Currently, this market makes up roughly 6-8% of the total legal market turnover. There are at least 3,800 providers currently operating, and 900 of these providers are in will writing and estate administration.

This was noted by David Gordon, non-solicitor convener of the Law Society Regulatory Committee, who said that in recent years the focus has been on the part of the legal sector, which is “well regulated” and where “consumer satisfaction is high.” “However not enough has been done to address that part of the market where there is little, if any, public protection,” he added.

Indeed, a recent report commissioned by the Solicitors Regulation Authority (SRA) and undertaken by Frontier Economics, The DataCity, and BMG Research, found that most providers agreed that some regulation or accountability and requirements should be imposed in the sector. Particularly, providers noted that it would be beneficial to have more regulation focused on wills and trusts services. It was also found that around half of unregulated providers thought people did not understand the difference between regulated and unregulated services. At the same time, 14% said they would become regulated if they had to disclose their status.

Interestingly, in 2020, a review of legal services conducted by Stephen Mayson, Honorary Professor of Law at UCL, called to ‘level the playing field’ and enhance consumer protection through targetted and proportional regulation. Having consulted regulators, professional bodies, academics, consumer groups, judges, and parliamentarians, the report recommendations, which were the outcome of a two-year independent review, were that ultimately whether qualified or not, all providers of legal services should be subject to both registration and regulation.

Three areas of concern

The CMAs initial research has highlighted that there are a number of potential areas for concern, including misleading advertising, unfair contract terms, pressure selling, lack of transparency on costs, and the suitability of products being sold. Further, the investigation will be looking at potential consumer law breaches in will-writing, pre-paid probate plans, and online divorce provisions.

Within the watchdog’s report, it specifically highlighted that, with will-writing not being a regulated service, concerns are that consumers are being misled by advertising which offers an “extremely low initial fee for advice” but does not indicate that costs can increase significantly. During the ongoing cost of living crisis, these apparent low fees can be a huge draw.

Further, another element for concern is that there can be unfair contract terms, including exclusions of liability, failure to provide cancellation rights, and terms that automatically appoint the firm as executor, which it highlights is often for a fee. There have also been reports of pressure selling and coercion of vulnerable customers.

Alongside will-writing, so-called ‘quickie’ online divorces are a growing concern. Having risen in popularity since the pandemic, these kinds of divorces have been hit with accusations of misleading claims regarding process simplicity and prices. A number of online ‘quickie’ divorce services have been accused of operating in this way, ‘churning clients’ and convincing them to spend more money to speed up the process. Consumers have also complained of “inadequate quality of service,” including everything from companies using the role forms to sending papers to the court late.

With regard to pre-paid probate plans, which the report notes are a “new development in the market” that see customers pay set fees upfront for probate, again, there are concerns that pressure selling techniques are being used on elderly customers and other vulnerable people. Another highlight was a lack of transparency about what costs are covered, and the inclusion of plans that are unnecessary or fail to serve their purpose. Indeed, the report notes that this can leave bereaved relatives left unable to settle bills or sell property.

Speaking about the need for the CMA investigation, Sarah Cardell, Chief Executive of the CMA, said that these services are ”essential to people,” and are used by people often at the “most challenging” times in their lives. “The CMA is aware that rising living costs mean people are watching their spending, so shopping around for a more affordable option is attractive and sometimes a necessity.”

“These may not be frequent purchases, but they are life-changing. That’s why it’s so important that we investigate so that people can select the right legal service for them – for divorce or probate or will-writing – with confidence. It’s essential that firms get the basics right, including complying with general consumer law, which applies to all traders. Customers must get a fair deal,” she added.

Investigation launched

The watchdog has now launched a call for consumers who have used these services, or other parties interested in contributing, including professional bodies, trade associations and consumer advocates, to reach out by 4 September 2023, via UnregulatedLegalServicesTeam@cma.gov.uk. The CMA has also begun to reach out to firms offering these services to obtain more information regarding their practices.

If the CMA discovers that firms have indeed breached consumer law in their operations, there are a number of different routes it might take, ranging from issuing advice and guidance on law compliance to taking enforcement action.

Commenting on the impending investigation, Gordon welcomed the move and said it would be important for the government to consider its recommendations to “rectify gaps in consumer protection.” Speaking on how the regulatory landscape is evolving in Scotland, he highlighted proposals put forward via the Regulation of Legal Services (Scotland) Bill but said that there are “serious questions” over whether it will do enough.