The unregulated sector
3.119 Finally this section briefly examines the unregulated legal services sector, and highlights some of the challenges.
3.120 A feature of the modern legal services sector is the extent to which services may be provided by those without individual authorisation or an entity licence under the LSA 2007. For the purposes of this report the unregulated sector is defined as those entities and individuals undertaking any legal activities (as defined by s.8, LSA 2007) in the course of a business or within the activities of a not for profit organisation, other than legal activities that are regulated within the legal services sector or indirectly regulated under a ‘non-legal’ professional title (eg, as an accountant, surveyor, etc).
3.121 The scale of activity so defined is difficult to estimate. Reserved activities represent only about a fifth of all legal services provided in England and Wales (Legal Services Board, 2012). Thus, the majority of work conducted across the sector is unreserved, even though it may be conducted by authorised and regulated providers. Indeed, BDRC data indicate that solicitors’ firms (a term which here should be interpreted to include CILEx members and supervised paralegals) remain by far the single largest frontline source of legal advice. However, as measured by individuals’ most recent advice-seeking activity, they account for less than half of that activity (44%). What is striking therefore is the very wide range of sources that exist for what consumers themselves consider legal advice. In terms of assuring standards and quality, this may be a significant challenge in seeking to identify and regulate general legal advice and assistance.
3.122 The breadth of activity is also reflected in the recent BDRC consumer data (Table 3.4). Taking consumers’ use of advice providers across a representative range of 28 justiciable problems, the research found that, in over a third of those problem areas, 50% or more of respondents relied on unregulated providers. These included areas where service users are likely to be vulnerable, including mental health (over 76%), homelessness (72%) and domestic violence (65%).
3.123 The ‘unregulated’ market is complex, since it potentially incorporates any ‘legal activity’ that is not a reserved activity, or is otherwise regulated (such as immigration advice). Three areas of activity examined by the research team illustrate this complexity.
- Advocacy and litigation are essentially reserved areas of activity, yet there are elements of unregulated activity within that, notably through (i) the ‘loophole’ created by the Courts and Legal Services Act 1990 prior to the LSA 2007 which permitted solicitors to be represented by agency clerks in certain proceedings, and (ii) the inherent discretion of the courts to permit litigants in person to receive support and advice from a litigation assistant or ‘McKenzie Friend’. This has led to the emergence not only of a range of support from pro bono groups, charities and not for profit (NfP) agencies, but to a more controversial class of ‘professional’ litigation assistants who provide support in return for out-of-pocket ‘expenses’.
Table 3.4: Use of regulated and unregulated advice providers (from BDRC data)
|Bought/sold a house||85.3||14.7|
|Dealt with estate||83.3||16.7|
|Been treated badly by the police||73.3||26.7|
|Made a will||73.3||26.7|
|Home repossessed/faced eviction||68.7||31.3|
|Other personal injury||66.0||34.0|
|Other problems with property I own||62.8||37.2|
|Problem with employer||54.6||45.4|
|Problems with a landlord||54.5||45.5|
|Injured at work||53.5||46.5|
|Road traffic accident||49.8||50.2|
|Welfare benefits, tax benefits||44.7||55.3|
|Disputes with neighbours||32.0||68.0|
- Will-writing is provided by a wide range of organisations outside the current regulated providers: banks, independent financial advisers, charities, will writers and will-writing companies, as well as providers of DIY will ‘kits’. Much of the work on the LETR research was undertaken in the shadow of the LSB’s investigation into will-writing, and its recommendation that the activity should be brought within the LSA 2007 regulatory system, but the field was retained as part of this study, not least on the basis that existing research provided a useful benchmark for likely quality issues and risks. Most of the attention in the will-writing debate has been focused on independent will-writing businesses, as these were seen as a high-risk activity in the light of a number of cases of cross-selling, high pressure sales, and over-charging. The research into will-writing however has not demonstrated a significant difference in the quality of wills produced by regulated and unregulated providers, but rather there is evidence (albeit based on a limited sample) that a similar (high) proportion of wills by authorised and unregulated providers is unsatisfactory. As this report was being written, the government announced its rejection of the proposal to reserve will-writing for the present, despite the weight of evidence in favour of regulation. Data from the LETR survey of will-writers (who were all members of their relevant membership bodies) also pointed, despite concerns about the possible cost of regulation, to a commitment among the majority to maintaining or strengthening standards of professionalism within the industry. This was reflected, for example, by positive attitudes both to the principle of regulation, and to the need for CPD enhancement (66.7% of respondents felt their CPD hours should be increased).
- Employment advice and representation, which has been a growth area of legal activity (LSB, 2012) represents another area where there appears to be substantial unregulated activity. Training within unregulated employment advice organisations was examined as an element of this research. The largest unregulated providers are substantial businesses, focusing on advising and representing corporates and SMEs on a range of employment and sometimes other regulatory matters. Some have a number of senior staff with professional legal qualifications, a number of whom have moved from regulated practice, and who exercise oversight of a team of ‘paralegal’ advisers. The latter tend to be LPC or BVC/BPTC or CIPD qualified. Systems of oversight and training tended to be at least comparable with paralegal training in practice settings, and opportunities for external training existed in some. Opportunities for career progression and internal mobility were clearly set out in the larger organisations. The largest providers use their own trained advisers for representation. Others used external ‘representatives’ or ‘consultants’, including in one organisation practising solicitors, highlighting an interesting link between the regulated and unregulated sectors.
3.124 As the employment advice sector shows, it is not just the consumer side that relies on unregulated service providers. Commercial organisations will also use a range of unregulated providers. These might include in-house people, with or without legal qualifications, providing legal advice to their employer on contracts, employment, and other general areas of activity. Volume debt recovery, including representation in small claims is another common area of unregulated activity. One example from the research data includes a builders’ merchant employing
a team of seven guys and one woman and they are in court constantly on debt recovery. The guy I was dealing with, he’s done over 800 court cases. It’s all much the same thing … He hasn’t even got a law degree.
3.125 The research also uncovered a small number of organisations operating as ‘paralegal firms’. These were operated by a variety of persons ranging from struck-off solicitors, to recent LPC/BPTC graduates, to those with no readily apparent formal legal qualifications, but with legal or quasi-legal experience. The emergence of such firms was also picked up in the qualitative research, as one interviewee observed:
[W]e get youngsters ring us up saying, ‘I don’t want to be a solicitor, I want to advise people, can I set up my own paralegal law firm?’ Frightening. The worst ones are the ones who have just graduated, can’t get a training contract and set up their own law firm. But it is happening. It really is.
3.126 There are no precise figures as to the scale of such operations and further research needs to be undertaken to try and assess the extent to which such firms are being created and are actually operating, and to identify key skills and knowledge gaps among those operating them. At the very least there should be more public information for consumers thinking of using such legal service providers, but this issue is beyond the scope of the current research.
3.127 The work undertaken in paralegal and unregulated services as part of the LETR research highlights the complexity of the unregulated market, the potential for wide variations in quality of service, and how little research has been undertaken into unregulated legal advice. Particularly with the cuts in legal aid, alternative providers may well be at the cutting edge of consumer-facing legal services in the near future. It is submitted that there is a strong case for further, independent, research into both the paralegal workforce, and developments in the unregulated sector.
 This is in addition to advocates such as local government officers and trading standards officers authorised under statutes other than the LSA 2007.
 The Ministry of Justice rejected the recommendation on 14 May 2013.
 More than one in three of all assessments in a wills shadow shopping exercise (T =102 wills) was thus scored poor or very poor (Legal Services Consumer Panel (LSCP), 2010).