The Law Society has written to justice secretary Kenneth Clarke urging him to act immediately to ban referral fees, after he revealed last week that he is ‘considering’ the issue.

Society president Linda Lee said she had met with Clarke and minister for employment Chris Grayling last week in the context of the government’s health and safety review, to raise her concerns over the ‘unethical’ fees.

She then wrote to Clarke on Friday to formally urge him to act.

Lee said: ‘We are asking the government to step in and ban a practice that is ethically wrong, treats accident victims as commodities for sale and adds no value to the justice system.’

In her letter to Clarke, Lee said: ‘We are, as you will be aware, deeply disappointed by the Legal Services Board’s decision [not to ban] referral fees… The Law Society supports the recommendation by Lord Justice Jackson that the payment of referral fees should be prohibited, provided that this applies across the entire legal sector.'

She added: ‘We believe that there will be major benefits to claimants and the insurance industry alike if insurers are not permitted to auction claims or sell them on to solicitors or other organisations.

‘The Legal Aid, Sentencing and Punishment of Offenders Bill provides an immediate opportunity for government to take action on referral fees.’

Tim Oliver, president of the Forum of Insurance Lawyers, also called on Clarke to ban the fees, or at least cap them. He suggested that a reduction in fixed fees and hourly rates in the system would be a means of curbing the fees.

Oliver said: ‘Referral fees provide no benefit to the system and should be banned, or at the very least capped.

‘They encourage bad behaviours and with the Bribery Act introduced last week, could even be considered a quasi form of bribery.

‘FOIL has also proposed that fixed fees and hourly rates in the personal injury system be reduced, which in turn would lead to a reduction in the price of referral fees.

‘This would be a market mechanism by which referral fees could be curbed while the government considers the practicalities of introducing a ban.’

He added: ‘The associated practice of harassment and incitement to litigate via unsolicited text messages to people who often have not even had an accident should also be banned.’

Clarke revealed that he was ‘considering’ the issue of referral fees during a debate last week following the second reading of the government’s Legal Aid, Sentencing and Punishment of Offenders Bill, which includes reforms to the funding of civil justice cases.

Responding to concerns raised by Liberal Democrat Sir Alan Beith over the 'scandal' of referral fees and the lack of any mention of them in the bill, Clarke said the government had not dealt with the parts of Lord Jackson's proposals covering referral fees because of the Legal Services Board's review of them.

'We now have its report, and the under-secretary of state for justice and I are considering referral fees,' he said.

The fees have been propelled into the media spotlight following a report by former justice secretary Jack Straw, which criticised insurers’ practice of charging referral fees to pass on personal injury cases to claimant lawyers.

Last week, the House of Commons transport committee said it would re-open its inquiry into the cost of motor insurance in order to hear oral evidence from Straw.