Industry News

Law Society outwitted and outmanoeuvred?

22 September 2011

Des Hudson, the Chief Executive of the Law Society, has written a thoughtful and informative piece in this week’s Law Society Gazette, criticising Santander’s decision to charge a fee for panel membership. The full article can be found here.

In last week’s Law Society Gazette he welcomed the decision of Santander to make membership of the Law Society’s Quality scheme a pre-requisite of applying for panel status.

LBS Legal does not consider Des Hudson’s comments to be consistent with one another. Santander’s new policy in relation to existing panel members is that you must demonstrate your calibre by either (a) paying the Law Society a fee to become a member of the CQS scheme, or (b) paying Santander a fee for compliance checks. Either way Santander receives some reassurance that the panel firm is up to scratch, and either way, the firm pays the costs of providing this reassurance. These are simply two roads to the top of the same mountain, except that on one road the Law Society runs the toll booth and on the other Santander does. I suppose it is entirely reasonable for Des Hudson to prefer the former, but equally, I doubt whether the bankers will be daft enough not to spot the inconsistency of his position.

Let us be clear about one thing though. The Law Society has worked extremely hard to encourage lenders to make CQS membership a prerequisite for panel status. If, there is a direct causal link between these efforts of the Law Society and Santander’s decision to start charging non-CQS member panel firms, can the Law Society really be said to have acted in the best interests of its members?

I am certain that the Law Society has attempted to act in the best interests of its members, but good intentions – as my Form Tutor used to tell me – do not preserve one from the consequences of bad decisions. The CQS application process is extremely time-consuming and bureaucratic and the costs are not negligible in such difficult economic times. The Law Society ought to have ensured that a significant benefit would accrue to a significant proportion of its members before it launched the scheme. The Law Society’s negotiating position vis-a-vis the lenders ought to have been that if we (the Law Society) subject our members to this cost and inconvenience, then you (the lenders) need to give a contractual commitment that they (the law firms) will achieve and retain panel status.

In short, CQS ought to be a stick with which good quality firms, small and large, can hit the lenders. The position is the opposite and CQS is now being used as a stick with which the lenders can hit law firms. Sadly, despite their best efforts, the Law Society’s negotiators appear to have been outwitted and outmanoeuvred by the lenders.

LBS Legal has been a big supporter and promoter of the CQS scheme. We have assisted numerous firms with the application process and in Denise Butler we almost certainly have the most experienced and successful CQS adviser in England. Our advice to firms remains that it makes commercial sense to apply for membership and that you should do so quickly. However, it will be extremely disappointing if large number of law firms continue to do their bit and become members of CQS and then find that over the next few years they see no benefit of membership. If that turns out to be the case, the Law Society may regret investing so much reputational capital into the scheme in the first place.

So our message to Des and his hard working team is that we are still believers and supporters, but please up your game and try to give us all something to smile about by outsmarting the bankers for once.

For advice about CQS Applications please contact denise.butler@lbslegal.co.uk

Ian Braithwaite
Client Relationship Manager

T: 0113 385 4483
M: 07432 695 289
E: ian.braithwaite@lbslegal.co.uk

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