Question to the Ministry of Justice:

To ask the Secretary of State for Justice, what assessment he has made of the potential impact on consumers of misleading “no win, no fee” advertising by high-volume claims firms, including instances where hidden fees or complex funding arrangements expose claimants to unexpected financial risk.

The Government is aware of concerns that misleading "no win, no fee" advertising can expose consumers to unexpected financial risk, including through unclear information about fees, deductions, and related funding or insurance arrangements. Whether entering into a “no win, no fee” arrangement through a legal services provider or claims management company (CMC), consumers should receive clear and timely information about what they are agreeing to.

The legal and claims management sectors are regulated independently of government. The Solicitors Regulation Authority (SRA) is responsible for regulating the professional conduct of solicitors and most law firms in England and Wales, including claims management activities they undertake. The Financial Conduct Authority (FCA) regulates specified claims management activities carried out by CMCs.

The Ministry of Justice has been working closely with relevant regulators and partners across the system, including engagement with the SRA and FCA, to understand and support action to address risks to consumers in the high-volume consumer claims market. I met with both organisations recently and impressed upon the regulators the need for tougher, more consistent regulation of conditional fee agreements.

The SRA has, and is, undertaking a range of work in this area, including ongoing investigations, a thematic review and discussion paper, requiring mandatory compliance declarations from firms operating in the high-volume consumer claims sector, consumer research, and guidance and Warning Notices for law firms. This includes action to improve how “no win, no fee” arrangements are explained, including exploring standardised wording and templates to support clearer consumer communications. The SRA will also shortly be reminding firms of their current obligations by publishing a Warning Notice relating to “no win, no fee” claims. Further information on the SRA’s work in relation to high-volume consumer claims is available at: https://www.sra.org.uk/home/hot-topics/high-volume-consumer-claims/.

The FCA has set out clear expectations for CMC marketing and customer communications, including that promotions must be fair, clear and not misleading and that “no win, no fee” advertising must include prominent information about relevant fees and termination charges. The FCA has also intervened to require misleading CMC promotions to be amended or withdrawn, and has recently written to CMCs active in motor finance claims to remind them to review their promotions and ensure compliance with FCA rules and the Consumer Duty.