Consultation proposes stronger safeguards for consumers using funded legal claims
The Solicitors Regulation Authority (SRA) has launched a consultation on proposals to strengthen consumer protection in high-volume consumer claims, including proposals relating to third-party litigation funding and firms undertaking high-volume consumer claims. The consultation forms part of the regulator’s wider programme of work to address risks identified in rapidly growing areas of consumer litigation.
The consultation sets out proposals aimed at improving transparency, strengthening oversight of funding arrangements and reducing the risk of consumer harm where large numbers of people pursue similar claims. The SRA says that while high-volume consumer claims can provide an important route to justice, poor practices can undermine public confidence and expose clients to unnecessary risk.
Among the proposals are measures aimed at improving how firms manage third-party litigation funding and after-the-event insurance arrangements, together with requirements designed to help consumers better understand costs, risks and the terms of funding agreements before proceeding with a claim. The regulator is also seeking views on safeguards intended to improve protections if a law firm involved in high-volume claims fails financially.
If adopted, the proposals would introduce additional regulatory expectations around funding arrangements and client information. Firms involved in high-volume consumer claims should review how they explain funding, costs and risks to clients, and consider whether existing processes would meet the proposed standards if adopted.
The consultation follows wider SRA work examining the operation of the high-volume consumer claims market. Recent independent research commissioned by the regulator found that although many consumers were satisfied with the outcomes of their claims, more than half experienced problems during the process, with delays, poor communication and a lack of clarity among the most commonly reported issues. The research also found that relatively few consumers recalled receiving clear information about costs at the outset of their claim.
The SRA says it is working alongside other regulators and stakeholders to improve standards across the sector. High-volume consumer claims currently include areas such as housing disrepair, data breaches, flight delay claims, diesel emissions, motor finance commission and other financial services claims. The regulator has already established joint initiatives with organisations including the Financial Conduct Authority, the Information Commissioner’s Office and the Advertising Standards Authority in relation to some areas of consumer claims activity.
Responses to the consultation will help shape any future regulatory changes affecting firms undertaking high-volume consumer claims. The SRA says its objective is to ensure that consumers receive appropriate protection while maintaining confidence in legal services and supporting access to justice.