Law Society suggestion to allow lawyers to make loans to clients criticised

markthorleyThe Law Society of Scotland has said lawyers should be allowed to lend money to clients in order to pay their own fees.

The Law Society argues such a system would assist in the funding of civil court actions which could not otherwise take place.

But the proposal, put forward as part of a wider discussion paper dealing with the future of legal aid, has been strongly criticised by solicitors who see a clear conflict of interest in the idea.

Writing in the Herald today, employment law specialist Stephen Smith ofThe Glasgow Law Practice said: “Lawyers tend to meet clients when they are likely to be upset, embarrassed, or at a low ebb financially – that tends to be when they are most in need of sound legal advice.

“It’s not the best time, however, for clients to take long-term financial decisions.”

Mr Smith gave a number of examples of situations where solicitors would find their interests and those of the client in conflict.

He wrote: “Under the reforms proposed, imagine a lawyer has “loaned” (i.e. gambled) his or her firm’s money for the fees to the client, perhaps even staked the hearing fee of £1,200 as well, and wins the case. Guess what happens if the employer doesn’t pay and goes bust?

“If the Law Society’s aim was to contribute to a system where only employers will have lawyers representing them, then their proposals are absolutely fine.”

Mark Thorley, convener of the Law Society of Scotland civil legal aid committee (pictured) as well as an author of the discussion paper emphasised that loans were already available to clients.

Mr Thorley said: “If eligibility levels for legal aid are to be reduced, with public funding targeted on individuals who are least able to pay, we need to ensure that affordable options remain as an alternative to legal aid.

“Legal insurance and loan schemes already exist and we think these could be expanded to help people who are not eligible for legal aid.

“These are often offered by third party organisations or through an associated company so would not affect the relationship between a client and their solicitor.

“Under an existing loan scheme we are aware of, the client must obtain advice from an independent solicitor who takes them through the loan documentation and not the client’s own solicitor nor a solicitor in the same firm, which offers client protection.

“Assessing the risks and merits of a case, and managing expenditure, is part of the process between clients and solicitors, regardless of the funding arrangements in place.

“As with any funding option, it is crucial that the client understands the arrangement, the costs, and the impact on any final award.

“However, the ability to fund cases in this way can be a significant benefit to individuals who may not otherwise be able to pursue a case.”

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