Extra interest from client accounts 'should fund advice sector'

The government should introduce a compulsory interest on lawyers' trust accounts (IOLTA) scheme for law firms to help fund the advice sector, the Low Commission has recommended in its draft report.

Lord Low, the crossbench peer and chairman of the commission, called on advice agencies to consider charging in a speech at the LegalVoice conference last month.

In the report, published last week, the commission said the interest involved would be "the extra interest that lawyers can achieve through grouping together funds they hold on behalf of clients", such as mortgage deposits.

The commission said IOLTA schemes were successfully introduced in the US, Australia and Canada.

It also recommended that legislation should be introduced to make the Access to Justice Foundation the recipient of unclaimed damages in collective actions.

The Low Commission also suggested that local authorities and housing associations could negotiate block insurance agreements on behalf of their tenants, which included cover for legal expenses.

A further proposal from the draft report was that the Financial Conduct Authority (FCA) should increase its levy on financial institutions for the Money Advice Service from £80m to £100m.

The commission said that at least 60 per cent or £60m of the levy should be used to fund debt advice agencies and the FCA should its use its powers to impose a levy on pay day loan companies, which would go entirely to debt services.

Steve Hynes, director of the Legal Action Group and a member of the Low Commission, said the aim was to create a national strategy for social welfare law which could influence party manifestoes for the May 2015 election.

He said the centrepiece was a £100m national advice fund that would be administered by the Big Lottery Fund.

"This is a draft report, which we are putting out to the agencies, NFPs and private sector for consultation. The final report will come out in December."