HSBC’s decision to create an unusually small mortgage lender panel of just 43 to serve the whole of the UK raises deep concerns for conveyancing solicitors and a wider issue for the public, raising serious questions over consumer choice.

While it was good news that all solicitors on the new panel are Conveyancing Quality Scheme (CQS) accredited by requirement rather than co-incidence - an acknowledgement that CQS is doing what amongst other things it was designed to do - there is, as the Law Society says in its Tweet on the matter - a fly in the ointment.

Consumers will, in effect, have less choice over which solicitor they choose to do their conveyancing work. If this becomes a common trend amongst the lenders, the public will have a choice of sorts: either pay an additional fee for their non-panel solicitor as well as the panel solicitor who acts for the bank, or agree to use the bank’s panel member firm. Is that really a choice?

Often, people will use the same solicitor to handle all of their affairs - for writing their will, handling their finances, business interests, family matters etc. Often, these legal affairs come into play when buying a home, so inevitably the role of the solicitor extends well beyond the transactional element. What is not clear is whether HSBC customers will have to pay extra to have the solicitors handle these extra but necessary parts of home buying.

Buying a home is an expensive enough process already, so these extra costs will not be taken lightly by consumers. Add to that the incentives offered by a lender to use the solicitor of the bank’s choice, as HSBC are doing, and it is hard for the home-buyer to say no. The effects of this on solicitors who have a perfectly strong track record in conveyancing will be detrimental to say the least if this becomes a widespread practice.

While I hope I am wrong and that many consumers who have used their family solicitor for years opt to stick to their preferred solicitor, I fear that many will take what may seem at first glance like an attractive offer from the bank. The panel firms will benefit, which is good news for them, but genuine choice will be sacrificed as a result.

Referral fee?

Assuming that those solicitors on the panel are not required to pay a referral fee how long will HSBC resist the temptation to charge for a place on the panel. How will estate agents who have grown accustomed to collecting a referral fee for passing on conveyancing instructions react to HSBC’s decision when no fees will be available for clients using HSBC?

Perhaps for HSBC, the benefit will be more sold mortgage products - the bottom line - and, consequently, a larger market share. However, I wonder if the bank's mortgage division will be aware of the impact this will have on its other divisions. Will solicitors and perhaps other advisers take steps to steer clients away from HSBC? Has HSBC fully considered whether the 42 firms can handle normal market conditions?

There are likely to be logistical problems with a panel so small. Many lenders, rightly, require the solicitors to witness the signing of the mortgage documents. How will HSBC ensure this, if at all, with so few solicitors available to do so? It flies in the face of the bank’s slogan - 'the world’s local bank'. Fewer than 40 solicitors serving all of HSBC’s customers in England & Wales is hardly providing a local service.

Is it sensible at a time when combating fraud is so important that HSBC implement a panel that will consign many of its borrowers to no physical contact with the solicitor or will they require people to travel in?

Many solicitors bank with HSBC, or hold client funds there. With other banks in the market keen to win that type of business, the profession's frustrations with HSBC over mortgage panels could be expressed by a migration of their banking to HSBC's competitors.

At a time when the Ministry of Justice is hailing the new era of legal services creating greater consumer choice with the arrival of alternative business structures, the opposite could happen in the conveyancing market. Potentially, the conveyancing market could become more crowded, but with a minority doing the work.

There is very little reason for HSBC to limit its panel in the way that it has, and little sense in other lenders following suit. If it is quality they are after, there are now more than 1,600 law firm branches across England & Wales with the CQS accreditation. That number is rising, but it is already at a figure which could serve the lenders and provide choice for consumers. The fact HSBC made it a prerequisite is testament to its standards. Why then not go the whole hog and take on more CQS firms? Why has HSBC chosen a different route? What was the role of Countrywide, the agent appointed by HSBC to run its panel in that decision?

There remain a lot of questions about how the HSBC set up works. Is there a referral fee and if so, this will need to be disclosed. What exactly is it that comes with the HSBC package - will customers find extra costs to ensure all the necessary work is carried out? Who are the firms exactly? Unless they are volume conveyancers, how will such a low number handle the volume?

Looking at the wider picture, the open market of conveyancing is the best price regulator for legal services in home-buying, but by limiting panel size with a fixed fee regime, choice and competition take a hit, at the cost to the consumer.

It would be naive to think everything will be fine and that home buyers will choose their own solicitor. Some will, but if this becomes widespread amongst lenders, consumer choice in conveyancing will be almost non-existent and it will be the profession as well as the consumer who feels the effects.

I know that the Law Society is assessing all possible options for responding to this latest development, but those responses should not be knee-jerk; as headline grabbing, futile action will ultimately do the profession more harm than good.

Jonathan Smithers is chair of the Law Society Conveyancing and Land Law Committee