Consumers are at increasing risk from a growing “fringe legal market” in will writing, probate work and claims handling, says a report due out today.

The inquiry into solicitors’ regulation finds that large swaths of legal activity are entirely unregulated, making consumers vulnerable to incompetence, negligence or even fraud across a wide range of transactions. Its author, Lord Hunt of Wirral, says: “Most of our fellow citizens would surely be taken aback to learn that anyone can currently set himself or herself up as a will-writer and also that some aspects of probate activity can take place outside the regulatory net.”

In the report seen by The Times, Lord Hunt calls for an extension of the regulatory “net” to any area of activity where “consumers currently enjoy no regulatory protection”. He adds: “I perceive a serious breach of both the public and the consumer interest in any area of activity that looks or ‘smells’ like a reserved activity but is allowed to go unregulated.”

At the same time, he calls for a radical overhaul of the regulation of solicitors, so that lawyers sign up to a legal equivalent of the Hippocratic Oath, based on fundamental ethics and values. “I want to see a move away from box-ticking and bureaucracy back to the fundamental values and principles that govern the solicitors’ profession — justice and the rule of law, integrity, independence, the best interests of the client and standards of service.”

He also urges tougher disciplinary action, to include more openness and the publicising on a user-friendly website all rulings and written findings of the Solicitors’ Disciplinary Tribunal.

The findings of Lord Hunt, the Conservative peer and former MP as well as a senior consultant with Beachcroft, the national law firm, are contained in an 88-recommendation, 115-page report. It was commissioned by the Law Society in the context of the shake-up of the legal services market due to take place over the next two years as a result of the Legal Service Act 2007.

The Act provides for a “big bang” in legal services, paving the way for big organisations, such as the Co-op, to offer legal advice to their customers and for solicitors to set up shop with barristers, accountants or other professionals in new kinds of businesses.

In the area of will-writing, where increasing numbers of companies offer services to the public, Lord Hunt notes that it is “not a straightforward contract”. He says: “Simple mistakes can lead to unjust outcomes and those outcomes will often occur a long time after the will has been written.”

In the area of probate, too, Lord Hunt says that consumers would be surprised to find there is “no clear, universal and effective code of conduct or complaints or compensation procedure in place”.

He adds that the abolition of legal aid for personal injury claims and the advent of no-win, no-fee deals has led to the arrival of claims handling companies, acting as middle men to “harvest” compensation claims and taking a commission.

Lord Hunt proposes a new form of self-governance for law firms in which those who set up certain internal governance procedures can be allowed to regulate themselves.

In conclusions that will be widely welcomed by big commercial law firms, he adopts a report in March this year by Nick Smedley, a former civil servant, that there should be a tailor-made regulatory regime for the City firms that allows them to set up their own audit and risk-management systems. But he proposes that this DIY model should be applied across the profession as a whole in what he calls an “authorised internal regulation” system, or AIR.

Bob Heslett, president of the Law Society, said that the report had been commissioned because “although there had been exhaustive consideration of the structure for regulation of legal services, much less attention has been paid to the vital question of how effective modern regulation of the solicitors’ profession should actually operate in the interests of the public and profession.” Lord Hunt had set out “an imaginative and thought-provoking” blueprint, he added.

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