Fifth Standing Committee on Delegated Legislation
Wednesday 13 October 2004
[Mr. Alan Hurst in the Chair]
Draft Legal Services Ombudsman
(Extension of Remit) Regulations 2004
2.30 pm
The Chairman: Before I call the Minister, I declare an interest as a member of the Law Society and a solicitor in private practice.
The Parliamentary Under-Secretary of State for Constitutional Affairs (Mr. David Lammy): I beg to move,
That the Committee has considered the draft Legal Services Ombudsman (Extension of Remit) Regulations 2004.
The draft regulations implement provisions contained in section 26 of the Courts and Legal Services Act 1990. The regulations extend the remit of the legal services ombudsman, allowing her to oversee complaints handling in respect of probate services provided by members of bodies authorised by the Secretary of State for Constitutional Affairs. As a result, they will provide an additional layer of protection for consumers purchasing probate services from authorised bodies.
The draft regulations will allow the functions of the legal services ombudsman, as set out in sections 21 to 25 of the 1990 Act, to apply in cases where probate services have been provided for a fee by a member of an authorised body under section 55 of the Act. The regulations will allow the legal services ombudsman to investigate the way in which a complaint regarding probate is dealt with by an authorised body. If she is dissatisfied with the way in which the complaint has been addressed, she may then require the body to reconsider it. To ensure that suitable legislative protections are in place for consumers before approved bodies begin to offer services in this area, the draft regulations have been laid prior to laying further regulations that will open the probate markets to new providers.
When a person dies, it is necessary for someone to deal with his or her estate. In saying ''estate'', I am referring to the money, property and possessions left by the deceased. That person is responsible for collecting in all monies, paying any debts and distributing what is left to the people legally entitled to it. For a person or persons to obtain the required authority to do that, they usually need to obtain a legal document called a grant of representation from the probate registry. The grant of representation will be either a grant of probate or a grant of letters of administration. I am referring to all those items when I talk about probate services.
Column Number: 4
Currently, only a solicitor, barrister or duly certified notary public—most of these are already qualified solicitors—can take instructions or draft or prepare the papers on which a grant of probate or letters of administration depend. Section 23 of the Solicitors Act 1974 makes it an offence for anyone else to prepare these papers for payment.
The director general of fair trading suggested in his report, ''Competition in Professions'', which was published in March 2001, that consideration be given to implementing sections 54 and 55 of the Courts and Legal Services Act 1990. Implementing section 54 would allow banks, building societies and insurance and trust companies to prepare the grant of probate or letters of administration for a fee. Implementing section 55 would allow bodies authorised by the Secretary of State to provide these papers for a fee. It was considered that doing so would increase competition in the market by allowing a greater number of providers to offer these services for a fee. The recommendation does not apply to individuals conducting their own applications of probate, as they may already do so unhindered by the Solicitors Act 1974. The Government accepted the recommendation to increase competition in this area, and announced their decision in July 2003 in the report ''Competition and Regulation in the Legal Services Market'', published by the Department for Constitutional Affairs.
The provisions of the 1990 Act require that new providers of probate services must be a member of a complaints handling scheme and satisfy any requirements of the Secretary of State with respect to complaints handling. As a result, before any new provider may charge members of the public for offering probate services, they must demonstrate to the Secretary of State that they belong to a complaints handling scheme and have their own complaints handling schemes in place. In addition to ensuring that new providers have a suitable complaints handling scheme, however, the 1990 Act also provides that the legal services ombudsman may oversee complaints handling by bodies authorised by the Secretary of State under section 55. Her powers are contained in section 26 of the Act.
In preparing the regulations, the legal services ombudsman has been consulted, and she has confirmed that she is content for them to proceed. As hon. Members will see, the regulations apply only to bodies seeking authorisation under section 55 of the 1990 Act. They do not apply to banks, building societies or insurance and trust companies under section 54. The reason why is that the legal services ombudsman does not have jurisdiction over the financial institutions specified in section 54. As there would be no equivalent oversight for financial institutions, the Government have decided that it is not in the public interest to move ahead with implementation of section 54. This decision has been taken after consultation with the Law Society and the legal services ombudsman.
Column Number: 5
In the meantime, it remains my intention to implement section 55 by the end of the year, to allow bodies authorised by the Secretary of State to provide probate services for a fee. The commencement of section 55 by statutory instrument will go some way towards removing the competition barrier identified by the Office of Fair Trading while ensuring that the necessary consumer safeguards are in place. It is on that basis that I commend the draft regulations to the House.
2.36 pm
Mr. Jonathan Djanogly (Huntingdon) (Con): I declare an interest as a member of the Law Society and a practising solicitor.
The Opposition do not oppose the regulations and consider their substance uncontentious. We are aware that, as the Minister noted, the motivation behind implementation of section 55 of the 1990 Act is to increase competition in the market for the provision of probate services. We support such a move on the basis that it should lead to an increase in the availability of probate services to the public and to their variety. It is essential, however, that sufficient complaints handling procedures are in place to govern the potentially wider marketplace for probate services. Close scrutiny of the services provided by the newly approved bodies is a prerequisite of liberalisation of the liberal market and is needed in order to provide adequate protection for the public.
I ask the Minister for clarification of the time scale for implementing the provisions. It seems somewhat odd that there has been such a long delay in the light of the fact that the report of the director general of fair trading recommended such a move in March 2001. Will the Minister explain that point? Accepting that the delay has happened, will he also tell us why the provisions are now to be implemented this month, given that Sir David Clementi is currently reviewing legal services regulation as a whole and that that review is due to be completed at the end of the year? Would it not have made more sense to wait until the conclusions of the report were available and to consider implementation of the provisions in conjunction with any proposed alterations to the regulatory framework for the legal profession?
I am aware that there are doubts in the Law Society as to the likelihood of all probate providers being similarly regulated. Without such a guarantee, the Law Society feels that there is a possibility that the newly approved bodies will gain an advantage over solicitors. More importantly, there is a risk to consumer protection. Can the Minister allay the fears in that regard? The legal services ombudsman herself has identified the risk that two-tier regulation will pose if her oversight of non-lawyers extends only as far as initial grant work without also including estate administration.
In the light of the considerable work load that the legal services ombudsman already manages, I am also concerned that the potential increase in the number of service providers may lead to the placing of undue pressure on her office. As I understand it, the average
Column Number: 6
turnaround time for cases referred to the office of the legal services ombudsman is two and a half months. Does the Minister have some kind of contingency plan in relation to the potential problems in respect of turnaround time, for example, that could occur with such an additional work load?
2.39 pm
Mr. David Heath (Somerton and Frome) (LD): It is a pleasure to serve under your chairmanship again, Mr. Hurst.
I have no problem with the regulations, which appear to enact provisions in the correct order, for once: we are providing a degree of protection before widening the scope of providers as the Minister described. I doubt that that there is a huge market for the extension and that the director general of fair trading has accurately identified a huge gap in the market that people are queuing up to fill. I understand that, so far, companies and bodies have shown limited interest in entering the market, so the fears voiced by the hon. Member for Huntingdon (Mr. Djanogly) about the ombudsman's work load are probably illusory, although it was a perfectly proper subject for him to raise with the Minister.
None the less, I am concerned. It is all very well to talk about a deregulatory approach, but often one finds that as one extends competition, one has to reinvent the professions that one has just liberalised. I am concerned that there may be a number of practitioners who are not legally qualified individuals or notaries public and who therefore do not have the usual professional background. More important, such people are not subject to the professional restrictions laid upon them in terms of accountability, regulation, avoiding conflicts of interest—a clear point of concern in relation to probate, as it could be disastrous to clients' interests—and providing professional indemnity.
I am also concerned about the modus operandi of such agencies: I would hate to see aggressive advertising and selling of probate services to people who are at the most vulnerable point of their lives. People facing a life crisis should not have to fend off aggressive marketing of services. That would be entirely inappropriate.
| 
