The Solicitors Regulation Authority today cranked up the pressure on high-volume claims firms amid continued concerns that clients are being treated unfairly. The regulator issued a formal warning on so-called no win, no fee agreements after inspections of firms revealed worrying signs of poor behaviour.
The warning does not materially change how the SRA will regulate such firms, but any suggestion that it has been ignored will be taken into account in disciplinary proceedings.
As of the end of December, the SRA had 83 open investigations relating to 72 firms working in the claims market. Six more have been shut down in the past two years.
Chief executive Sarah Rapson said: ‘This is a priority area for the SRA and a topic stakeholders consistently raise with us. The expectations set out in this warning notice should therefore not be a surprise. Some firms are not fulfilling their obligations to always act in their clients’ best interests and follow our rules and standards. We are using all the tools at our disposal to take action against these, highlighting known issues and promoting compliance in order to protect the public and help the sector to comply with the rules.’
The SRA has already contacted some firms requiring them to complete a declaration that they understand - and are following - the rules.
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But there is pressure on the SRA to do more: earlier this month justice minister Sarah Sackman MP said she had personally impressed on the organisation the need for ‘tougher, more consistent regulation’ of conditional fee arrangements.
In the warning notice itself, the SRA stresses that when it works well, the high-volume claims sector can provide an effective route for consumers to enforce their rights. But there is concern about a lack of transparency about the fees clients will pay if their claim succeeds. Just 12 out of 25 firms visited by the SRA in its review of the sector had records showing they had given all the required costs information to clients. In some cases, firms failed to provide any information on fees.
Some firms were also found to be structuring no win, no fee agreements to serve their own rather than the client’s best interests. There was also no thorough due diligence and validation to ensure that claims management companies and lead generators are complying with their regulatory obligations.
The SRA warns firms about creating unrealistic expectations about clients’ chances of success, the speed and simplicity of the process or the financial risks involved. Firms that use template documents must verify that these documents contain sufficient, accurate, and clear information, while these must also be regularly reviewed to ensure ongoing compliance.
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