The Solicitors Regulation Authority has warned that government plans to tap the interest on client accounts could impose new costs on it - and the profession.
Responding to the Ministry of Justice consultation on the interest on lawyers’ client accounts (ILCA) scheme, the SRA said the proposed arrangements could require the design and creation of new IT systems or data collection arrangements as well as the costs of communicating the impact of changes to the profession.
Even once the ILCA is in force, the regulator said, ongoing management costs would be incurred on any additional data collection and analysis and legal enforcement activity.
It added: ‘As the SRA is funded solely by individuals’ and firms’ practicing certificate fees, considerations would be needed as to whether these may need to rise to reflect any new operational requirements. We therefore aim to work closely with the MoJ as these proposals are refined and as potential costs are quantified both to understand the implications for the SRA, and to help to reduce these costs wherever possible.’
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The MoJ proposes to retain 50% of the interest generated on individual client accounts, and 75% on pooled client accounts, which would be remitted into central funds. The plan has been criticised for over-estimating income from client interest and over the lack of information about what the money would be used for.
The SRA has itself mooted the idea of changing the arrangements for client interest: in a 2024 consultation it identified concerns that allowing firms to retain interest generated on client money could create incentives that are not aligned with clients’ best interests, such as holding monies for longer than is necessary. It said at the time there was no ‘compelling evidence’ as to how firms retaining interest on client accounts is in the consumer’s interest and said the current position was ‘difficult to justify’.
However following resistance from the profession the SRA said in 2025 that dealing with client interest was not an immediate priority.
In its consultation response the SRA does not explicitly say whether it is in favour of the ILCA scheme. 'We look forward to continuing to work collaboratively with the MoJ as these proposals develop,’ it concludes.
The consultation closed earlier this month.
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