Government confirms tougher oversight of claims firms and future regulation of litigation funding
The UK government has signalled a renewed push for tougher oversight of claims firms and litigation funding arrangements, amid mounting concerns about consumer protection and the operation of “no win, no fee” agreements in the high-volume claims market.
In a written parliamentary answer published on 16 January 2026, the Ministry of Justice confirmed plans to introduce proportionate regulation of third-party litigation funding when parliamentary time allows. The proposed framework is intended to enhance transparency, strengthen protections for claimants, and improve confidence in how litigation funding agreements operate.
The announcement comes alongside increased pressure on regulators to address risks within the consumer claims sector. Justice minister Sarah Sackman KC MP has confirmed that she recently met with the Solicitors Regulation Authority (SRA) and the Financial Conduct Authority (FCA) to discuss concerns about poor practices affecting consumers.
Sackman said she impressed on both regulators the need for “tougher, more consistent regulation” of conditional fee arrangements and offered government support to address ongoing issues in the sector.
Responding to a written parliamentary question, the minister acknowledged concerns that misleading “no win, no fee” advertising could expose consumers to unexpected financial risks. These risks include unclear or insufficient information about legal fees, deductions from compensation, and related funding or insurance arrangements.
She stated that consumers entering into “no win, no fee” arrangements—whether through law firms or claims management companies—should receive clear and timely information about the terms of the agreements they are signing.
The Ministry of Justice also confirmed that it does not currently hold data on the average proportion of compensation awards taken up by legal fees and third-party litigation funding costs. This lack of centralised data has been cited as a challenge for assessing the overall financial impact of such arrangements on claimants.
According to Sackman, the SRA is already undertaking a range of regulatory work in the high-volume consumer claims market. This includes ongoing investigations, a thematic review and discussion paper, consumer research, and the issuing of guidance and warning notices to firms. The regulator has also required mandatory compliance declarations from firms operating in this sector.
The SRA is expected to shortly remind firms of their existing obligations by publishing a warning notice specifically addressing “no win, no fee” claims.
In addition, the SRA and FCA have previously issued joint warnings to law firms and claims management companies over poor practices in motor finance commission claims, following a Supreme Court judgment last summer. Firms were told they must inform clients about the existence of a redress scheme established to compensate consumers and must clearly explain any fees that may be payable if a client chooses to terminate a retainer.
The SRA has repeatedly highlighted concerns about potential consumer harm arising from claims linked to the mis-selling of financial products and services, data breaches, diesel emissions, flight delays, housing disrepair, and cavity wall insulation.
Last year, the regulator carried out a survey of 129 firms, requiring them to provide information on the type and volume of claims they handled, whether referral arrangements were in place, and what litigation funding they received. This exercise was followed by a mandatory declaration requiring firms to confirm compliance with their regulatory obligations.
Together, the government’s planned legislative changes and the regulators’ ongoing enforcement activity signal a coordinated effort to strengthen oversight of claims firms and litigation funding arrangements, with a stated focus on protecting consumers and improving transparency across the sector.