Sunday, May 19, 2013

Exceptional care for vulnerable clients

How do the lawyers within your firm identify vulnerable clients and meet their needs?

The concept of vulnerability has been examined by a number of commentators in a range of fora. A good starting point is the Oxford Dictionary defines vulnerable as “…exposed to the possibility of being attacked or harmed, either physically or emotionally”. Collins’ definition goes on to add “…exposed to …persuasion”. Both definitions are useful to the COLP. Clients can be said to be vulnerable if they are incapable of making an informed decision about their affairs or do not understand the actual or potential consequences of any action they may be instructing you to take on their behalf.

What should be your firm’s priorities and responsibilities when deciding to act for and when advising ‘vulnerable’ clients?

The Principles of the Code of Conduct 2011 require you to provide a proper standard of service, taking into account the individual needs and circumstances of each client.

Indicative Behavior 1.6 states that, in taking instructions and during the course of the retainer, you must have proper regard to your client’s mental capacity or other vulnerability, such as incapacity or duress. Indicative Behavior 1.28 states that you are unlikely to have complied with the Principles if you act for a client when there are reasonable grounds for believing that the instructions are affected by duress or undue influence without satisfying yourself that they represent the client’s wishes.

Indicative Behavior 1.7 requires you to consider whether you should decline to act or cease to act because you cannot act in the client’s best interests.

The leading compliance legal matter management system CLIENTCAREmonitor (CCM) identifies a “taxonomy of vulnerabilities”. In setting up a new matter CCM forces the lawyer to concentrate their mind as to whether the client is exposed to any of the following:

Information vulnerability
Pressure vulnerability
Redress vulnerability; and
Impact vulnerability

Information Vulnerability

Some clients may be particularly vulnerable as a result of the greater difficulties they face in obtaining and processing the legal advice given to make informed purchasing decisions. For example, if the clients are restricted physically, such as by being housebound, they may find it difficult to access the information necessary to make an informed choice. Furthermore, some consumers will lack the ability to use information seeking tools, such as the internet. It should also be noted that such consumers are likely to be subject to what has been termed “marketing exclusion”. Because they are not seen as profitable, they may find that they are not targeted by suppliers with information that they might have found useful.

The SRA have recently issued press releases about language vulnerabilities. How do you advise clients for whom English is not their first language or who speak no English at all?

To comply with the Code and provide a proper standard of service, you must ensure that your client understands the advice you are giving and fully appreciates the ramifications of their actions. Using a family member as an interpreter may appear to be a practical solution,but may simply move you towards a ‘pressure vulnerability’  as in many instances this has merely facilitated underlying duress, undue influence or, in the most extreme situations, fraud.

The use of independent interpreters/translators is the only certain means of ensuring your client’s best interests are served, but this comes at a cost. If your client, or rather, potential client, is not prepared to bear that extra cost, you may well have to advise that client to go elsewhere, as you cannot act in his or her best interest. Other examples of information vulnerabilities include age (although advancing age does not necessarily imply vulnerability), mental health issues, learning disabilities, depression, serious Illness, addiction, deafness or blindness.

Pressure Vulnerability

In the perfect market, the client’s actions are fully voluntary. In practice, clients frequently make decisions when subjected to pressure. There may be overlap with other aspects of vulnerability; for example, clients may be more easily pressurised into making a decision if they lack relevant information. The most common pressure vulnerability is undue influence, for example in a situation where a client seeks to radically change the terms of their wills, transfer shares in property, release equity in their properties, particularly if a client is accompanied by the person to benefit at the time of giving instructions. In these circumstances, it is good practice to speak to the client alone and ascertain that the wishes are those of the client alone without undue influence from any third party.

Where physical intimidation is present layers would doubtless have little hesitation in finding a remedy, such as by allowing the victim a private law right or allowing an enforcement authority to take action. Greater difficulties arise where psychological pressure is in issue. The trick is to identify this as early as possible (hence the logic of CLIENTCAREmonitor) and to ask probing questions as early as you can; don’t wait until the client is about to sign the relevant document. It may be sensible to advise clients in this position that you will want to speak to them alone at the time they make the initial appointment rather than springing it on them at the time.

I recently attended a meeting with the head of fraud at a top 5 lender who advised that lenders were become increasingly concerned by the inability of some solicitors to recognise vulnerable clients. I was advised of a scenario involving a wife/partner being asked to remortgage the matrimonial home to secure funds for the partner/husband’s business ventures (but equally this scenario could also fall into the sections on mental health or depression/illness etc). In the case of a mortgage default the lender will soon be made aware of the claim of vulnerability. Not only could such a situation lead to your firm being removed off the panel but also potentially being reported to the SRA as well as facing an insurance claim.

All property lawyers should be familiar with the the ruling of the House of Lords in Royal Bank of Scotland v Etridge. This case lead to an overhaul by the banks as to how co-owners in this situation should be advised. A solicitor once admitted to an underwriter at  Zurich that, when she had a meeting with a wife who had been asked to remortgage the matrimonial home to secure her husband’s business debts, the wife had no idea what she was really being asked to do, i.e. put her home at risk of repossession if her husband’s business failed. After a frank discussion with the solicitor, she refused to sign the papers.

Insurers, regulators, the LEO and lenders all say that there are still too many co-owners in this situation who are not being properly advised (or perhaps more accurately -  it can’t be proved that they were properly advised) and negligence claims come in from lenders against the law firms when the business fails but repossession proves to be troublesome when the co-owner defends on grounds that they weren’t properly advised.

Redress Vulnerability

Another way in which clients may be vulnerable is through the greater difficulties they face in obtaining redress (redress vulnerability). Again, there will be a connection here with other aspects of vulnerability. For example, clients may find it difficult to secure redress because they are unaware of their legal rights, or of the mechanisms under which they can seek a resolution of their grievances. Where a firm sends and receives countersigned  a well drafted client care letter then the issue of redress vulnerability goes away.

Impact Vulnerability

Impact vulnerability is perhaps the least obvious vulnerability and concerns the greater effect of loss, or harm, on certain clients.

The greater loss suffered by vulnerable clients from making inappropriate decisions is likely to result from low income and/or low wealth (although not impacting solicitors take note of the recent FSA issues concerning pay day loans).

The ideal way of reducing impact vulnerability is to reduce the chance of the client making a decision that will have such an impact. A client who is well-informed, confident and capable, acting with choice and without pressure in circumstances where he has a remedy should it need to be used is unlikely to make such a decision. Impact vulnerability can, therefore, perhaps be best-tackled by addressing the other forms of vulnerability identified and discussed above.

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