What can you do to prevent complaints about overcharging of fees? Each year the Lawyers Complaints Service receives numerous complaints about fees. LawTalk explores some options for the profession to ensure your client has realistic expectations to avoid problems later.
Each year the Lawyers Complaints Service receives numerous complaints about fees. In the past five years, complaints that include claims of overcharging made up 25% of all complaints. Being the subject of a complaint is often unwelcome, time-consuming, and potentially stressful for the lawyer.
So, what can you do to reduce the likelihood of being the subject of a complaint about overcharging?
Clear communication and ensuring the client has realistic expectations can go a long way towards avoiding problems later. Make sure you provide details around your fee structure, fixed fees, including the scope of any work covered, and time allocated for services. This ensures that clients understand the level of fees they can expect for the services they need.
Invoicing in a timely manner also reduces the likelihood of a complaint.
Be up front about how you will be billing, and what you are billing for. Some clients may not be experienced in working with a lawyer and won’t know what to expect. Basic steps such as explaining the fee structure, providing a written letter of engagement containing information about the fees , and updating clients about milestone dates and actions taken can mitigate the need for lengthy explanations and contentions later.
In a decision earlier this year, KC v TG [2022] NZLCRO 41 (6/5/22), the Legal Complaints Review Officer (LCRO) said that just providing the terms of engagement including an hourly rate would have little meaning for most clients, especially those who are not accustomed to legal processes or instructing lawyers. “Without context, simple reference to an hourly rate in connection with legal work to be undertaken, is meaningless.”
The LCRO noted that most lawyers included in their terms of engagement a provision for monthly invoicing, or invoicing at the conclusion of significant events. This helped clients with their budgeting and gave a good indication of how legal fees were tracking.
“In my view, given the requirement for a lawyer to only charge a fee that is fair and reasonable to both parties, where time is the only fee factor referred to and the matter is urgent and important, there is an obligation on a lawyer … to ensure that their client is regularly ... updated about where fees sit.”
In terms of what you can charge, some of the factors considered reasonable in making up a fee include but are not limited to:
The types of complaints that are associated with fees are mostly that fees are high, not broken down, and exceed the quote. Many also include fees that were deducted before an invoice was supplied.
Clear communication and ensuring the client has realistic expectations can go a long way towards avoiding problems later. Make sure you provide details around your fee structure, fixed fees, including the scope of any work covered, and time allocated for services
Trusts and estates, family law, and property are consistently the areas with the most fee complaints. Clients may only go through the process of settling an estate once in their lives. It should not be assumed they know what is involved in administering and settling an estate.
Complaints in this area are often to do with estate settlement fees and taking fees from estate funds without consent or prior warning. Such complaints may come from estate beneficiaries who have not been aware of costs but who have a right to complain under s 160 of the Lawyers and Conveyancers Act 2006.
Delaying the sending of invoices can result in clients challenging the amount due. There is a direct correlation between when invoices are sent out and the time it takes a client to pay/the likelihood of collecting payment. Keeping on top of current invoicing can speed up the payment process and ensure all parties have a clearer memory of what activities were undertaken during the period of service.
Other fees-related complaints which alleged incompetence involved junior lawyers undertaking most of the work with insufficient supervision.
A client’s perceived ‘value for money’ can sometimes rely on whether representation or actions resulted in the client’s success. Being realistic about a client’s chance of success, and explaining the cost of both outcomes, will enable a client to consider a situation in which they are not successful.
In their discussion document, the Independent Review Panel noted that “there is usually an information asymmetry between buyers and sellers of legal services, since the average client is not well equipped to judge the quality of the service being provided.”
Many complaints to Standards Committees result in the complaint being dismissed and no further action being taken. In the past five years 81% of all complaints resulted in no further action.
Complaints about fees have a slightly lower ‘no further action’ rate of 76.5%. This means that fees complaints were more likely to either be resolved by negotiation between the parties, or result in an order. Resolved complaints include situations where the resolution was agreed, settled, or mediated between the parties, or the complaint was withdrawn or discontinued.
Complaints about fees have a slightly lower ‘no further action’ rate of 76.5%. This means that fees complaints were more likely to either be resolved by negotiation between the parties, or result in an order
When compared to all complaints, fees complaints also result in an order against the lawyer more frequently than all complaints on average. Orders made include costs or a fine, an apology, practice intervention or education. This indicates that where the complaint is upheld, if the parties do not come to an agreed resolution, orders are more frequently made against the lawyer in a fees complaint.
Twenty percent of fees complaints are referred to the LCRO. The average rate of referral to the LCRO for all complaints is 16 percent. The higher referral rate for fees complaints is largely due to ‘Orders made’ being challenged by lawyers, with a few ‘no further action’ decisions challenged by complainants.
This indicates that the LCRO is used more by lawyers than complainants (mostly members of the public).
Fees complaints result in fewer referrals to the Tribunal than all complaints together.
Improving transparency for consumers – developments in the United Kingdom
The UK’s Competition and Markets Authority (CMA) conducted a market study in 2016 which found that there was not enough information available on price, quality, and service to help those needing legal support to choose the best option for them.
This limited transparency made it more difficult for consumers to compare legal service providers, thereby weakening competition. The CMA found that this may have contributed to the large differences in the prices charged by different providers for the same services, meaning that some consumers were likely to be paying more than they should.
Information shortcomings, including limited consumer understanding of the sector and the lack of transparency offered by providers, also led to some consumers believing they could not afford legal advice and resorting to doing nothing or attempting to resolve their issue themselves.
The CMA recently followed up on this work with a review of the legal services market in December 2020. Their goal was to assess the implementation and impact of the CMA’s market study recommendations.
Since the Market Study, the CMA found that all of the regulatory bodies had taken steps to introduce minimum requirements for price and service transparency, mostly through the adoption of regulatory requirements.
The result has been a very substantial increase in the availability of such information, especially once the regulatory changes came into effect. The CMA encouraged regulatory bodies to take action to ensure high levels of compliance.